■^ 

University  of  California, 

GUIfT  OB- 

Alexander  Del  Mar. 

18T8. 


Accessions  /\/u./^yZ^p^^..-         Shelf  i^o. 

^— — 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

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FINANCIAL  ECONOII: 

BEING  AN  ENQUIRY  INTO 

THE  PRESENT  STATE  OF  MONETARY  SCIENCE; 

IN  CONNBCTION  WITH 

THE  PRINCIPLES  GOVERNING  TRADE,  COMMERCE,  CURRENCY  AND 

banking; THE    NATURAL    LAWS     OF    THE     DOMESTIC     AND 

FOREIGN  exchanges; THE  INTERESTS  OF  CAPITAL  AND 

labor; THE  REVENUES  OF  STATES  AND  NATIONS;— 

SYSTEMS    OF  NATIONAL    TAXATION; THE  FUND- 
ING    OF     GOVERNMENT      DEBTS; AND     THE 

MOST     APPROVED      METHODS     OF     REGU- 
LATING    THE      PECUNIARY      AFFAIRS 
OF    A    BODY    POLITIC,    SO    AS     TO     * 
PROMOTE       THE       MATERIAL 
INTERESTS       OF       THE 
WHOLE    PEOPLE. 


VOLUME     I, 

NATURAL   HISTORY    OF    MONEY. 


By  JOHN  EADIE,  A.  M. 


KEW  YORK: 

HOSFORD    A    KETCHAM,    STATIONERS    and    PRINTERS 

6T  and  59  William  Street. 

18  0  5. 


L I  B  R  A  11  Y 

UNIVERSITY   <H'  „ 

CALIFORXL\ 


< 


Entered  according  lo  Act  of  Congress,  in  the  year  1865,  by 

JOHN    EADIE,     A.M. 

In  the  Clerk's  Office  of  the  District  Court  of  the^nited  States  for  the  Southern 
District  of   New  York. 


IIOSFORD    4    KETCHAM, 
STATIONERS    AND    PRINTERS, 
6-  Rnd  59  William  St.,  N.  Y. 


ERRATA. 


Page  89. — Second  line  tT(>m  foot,  for  "systems,"  read: 
sijmptomH. 

Page  60. — Eleventh  line  M)m  foot,  for  "the  increase  of 
prices  of  commodities,"  vq/(\  :   the  prices  of  commodities. 

Page  65. — Sixth    line    frcHji   head,   for    "interest  does,' 
read:  interest — do'^s. 

Page  84. — Ninth  line  ^om  foot,  for  "Russia,  as  well  as 
portions  of,"  read  :  Austria  and  Russia,  as  well  as  poi'tions  of. 

Page  96. — Fourth  line  from  foot,  for  "paper  media  are 
controlled,"  read  :  pa/per  mema  hp  controlled. 

Page  11 9. — Tenth    line    fro^i    head,    for   "correspond," 
read  :  corresponds 


(«) 


and  59  WiUlam  St.,  N.  Y. 


Pt 


TO 

THK   HONORABLE 

JAMES       GALLATIN 

OF 

NEW  YORK, 

:0     ENCOURAGED     THE     WRITING     OF     IT, 

AND 

WHO   KINDLY   REVISED   IT   IN   MANUSCRIPT, 

THIS  WORK 

IS 

RESPECTFULLY      DEDICATED 

BY 

THE      AUTHOR. 


(8) 


PREFACE. 

It  has  been  the  object  of  the  writer  in  this  Volume  to 
make  plain  to  the  understanding  of  every  person,  the  nature 
of  Money  and  the  offices  which  it  performs  in  economical 
affairs.  In  the  second  Volume,  the  nature  of  the  devices 
employed  for  economizing  the  use  of  real  Money,  and  the 
relationship  of  these  devices  to  financial  economy,  embracing 
the  credit  system,  banking,  sources  of  wealth,  national 
debts,  funding  systems,  taxation,  tariffs,  and  duties,  as  well 
as  the  phenomena  of  the  Money  market,  will  be  the  principal 
topics. 

Brooklyn,  Decbmber  24th,  1864. 

(6) 


CONTENTS. 


VOLUME    I. 


CHAPTER  I. 


V 


PAOB 


1.  Early  Historical  References  to  Money.  2.  Usages  of  Thirty- 
eight  Centuries  among  Civilized  Commanities.  3.  The 
Money  of  Civilized  Nations  circulates  among  them  all 
as  the  Common  Property  of  all, 9 

CHAPTER  n. 

1.  Usefulness  of  Money.  2.  Natural  Discovery  of  Money 
from  the  necessities  of  Mankind  in  Society.  8.  Various 
kinds  of  Money  used  in  dijfferent  ages  and  Countries, 23 


CHAPTER  in. 

.  Division  of  Labor  facilitated  by  the  Use  of  Money.  2.  Ma- 
\  terial  Superiority  of  Nations  proportioned  to  the 
Superiority  of  their  Monetary  Systems.  8.  Civilization 
impossible  without  an  equitable  Monetary  System, 29 


CHAPTER  IV. 

The  First  Attribute  of  Money :  A  Commodity,  and  its  Relation- 
ships  to  other  Commodities, 43 

CHAPTER  V. 

The  Second  Attribute  of  Money :  An  Instrument  of  Commerce, 

or  Universal  Medium  of  Exchange,  or  Circulating  Medium,      63 

cr) 


Vlll  CONTENTS 


CHAPTER  VI. 

PAQK 

The  Tliird  Attribute  of  Money :  A  Measure  of  Prices,  or  Stan- 
dard of  Values, 63 

CHAPTER  VII. 

The  Fourth  Attribute  of  Money :  An  Equivalent  or  Recom- 
pense,  t 93 

CHAPTER  VIII. 

The  Fifth  Attribute  of  Money  :  A  Sign   or  Representative  of 

Property  or  Commodities, 101 

CHAPTER  IX. 

The  Sixth  Attribute  of  Money :  Wealth,  or  the  "  Thing  Signi- 
fied" to  the  Extent  of  its  Value  in  Exchange, 103 

CHAPTER  X. 

1.  Review  of  the  Six  Attributes  of  Money — Monetary  Unit,  or 
True  Measure  of  Prices.  2.  Local  and  Universal  Money 
identical  as  Measures  of  Prices  within  their  respective 
Spheres, 115 


-  -i  i3i  a  A  R  \ 
UNIVERSITY  < 


CHAPTER   I. 

1.  Early  Historical  References  to  Money.  2.  Usages  of  Thirty- 
eight  Centuries  among  Civilized  Communities.  8.  The  Money 
OF  THE  Civilized  Nations  circulates  among  them  all  as  their 
Common  Property. 

1.  Money  has  been  in  use  since  the  twentieth 
century  before  our  era.  The  honor  of  having  dis- 
covered or  invented  it,  in  the  most  remote  antiquity, 
has  been  claimed  for  several  ancient  nations.  In 
sacred  history  it  is  mentioned  among  objects  familiar 
to  the  people  in  Abraham's  time,  about  thirty-eight 
centuries  ago;  paying  "current  money  with  the 
merchant "  for  a  burial  place,  being  recorded  in  the 
book  of  Genesis.  This  is  the  most  authentic  histori- 
cal reference  to  the  early  use  of  money.  At  that  time 
the  largest  centers  of  population  were  at  Babylon,  in 
the  lower  valley  of  the  Euphrates;  at  Nineveh,  on 
the  upper  Tigris ;   at  Sidon,  on  the  eastern  shore  of 

(9) 


10  NATURAL    HISTOKT 

the  Mediterranean ;  and  at  Memphis,  in  the  lower 
part  of  the  valley  of  tlie  Nile.  Sidon  was  nearest  the 
geographical  center  of  the  infant  world,  and  there  the 
depots  of  international  trade  ^vere  first  established. 
It  was  in  the  vicinity  of  Sidon  that  "current  money" 
was  paid  by  Abraham.  He  had  emigrated  from  the 
upper  valley  of  the  Euphrates  into  the  settlements  of 
the  Phenicians,  or  Philistines,  the  first  great  mer- 
chants mentioned  in  history.  The  trade  of  Sidon  and 
Tyre,  conducted  by  tliese  mercliants,  extended  at  the 
dawn  of  history  overland  to  Babylon  and  Nineveh, 
on  tlie  east;  and  to  Memphis,  by  way  of  the  sea-coast 
and  the  Nile,  on  the  south.  Tiie  Egyptian  hierogly- 
phics, which  Thomas  Young  and  M.  Champollion 
have  enabled  us  to  read,  make  mention  of  the  Philis- 
tines among  the  people  with  whom  the  Egyptians 
had  intercourse  as  early  as  the  time  of  Abraham, 
and  confirm  the  statements  wliich  Herodotus  had 
made  to  him  by  the  Plienician  Priests,  as  to  the 
founding  of  the  first  city  of  Tyre,  on  the  mainland, 
more  than  two  thousand  ^''ears  before  our  era. 
Sanchoniathon,  the  Phenician  historian,  is  generally 
supposed  to  have  lived  in  the  twelfth  century  before 
our  era,  and  in  his  time  Tyre  was  a  splendid  city, 


OF    MONEY.  11 

although  the  greatest  development  of  her  commercial 
enterprise. took  place  six  or  seven  centuries  subse- 
quent to  liis  time.  As  Tjre  was  founded,  by  emi- 
grants from  the  neighboring  city  of  Sidon,  the  latter, 
it  may  be  inferred,  was  one  of  the  very  earliest  places 
in  wliicli  mankind  assembled  in  large  numbers  for 
purposes  of  trade;  the  country  immediately  adjoining 
it  being  too  barren  to  afford  subsistence  for  a  large 
population,  grain  was  procured  from  Egypt,  in  ex- 
change for  w^orks  of  art  or  manufactures,  whicli  the 
Sidonians  either  made  themselves  or  procured  from 
the  populous  countries  around  Nineveh  and  Babylon, 
Money  w^as  from  the  earliest  periods  so  familiar  to 
the  Phenicians  in  their  commercial  dealings,  that 
they  have  been  supposed  to  have  invented  it;  and 
their  extraordinary  enterprise  proves  them  to  have 
possessed  sufficient  genius  for  making  so  great  a 
discovery.  They  w^ere  tlie  first  to  navigate  the  seas, 
and  they  were  also  the  pioneers  of  commerce  over- 
land. Their  colonies  lined  the  shores  of  the  Mediter- 
ranean, and  extended  along  the  Atlantic  coast,  into 
Spain,  France,  Great  Britain,  Ireland,  etc.  Gades, 
the  modern  Cadiz,  in  Spain,  was  founded  by  them,  it 
is  supposed,  in  the  twelfth  century  before  the  Christian 


12  NATUEALHI8T0EY 

era.  Whatever  may  liave  been  their  systems  of 
government  or  religious  opinions,  the  distinguished 
place  they  held  at  the  head  of  the  commerce  and 
trade  of  the  world,  for  so  many  centuries,  would 
doubtless  have  been  lost  to  them  had  they  not  won 
the  confidence  and  respect  of  mankind  by  adherence 
to  those  principles  of  fair  dealing,  flowing^  from  a 
sense  of  honor  and  justice,  which  have  always  distin- 
guished the  true  merchant  of  every  nation,  from  those 
sea-rovers,  or  pirates,  frequently  called  "  merchants," 
whom  the  ancient  mythologies  assigned  to  the  guard- 
ianship of  deities  presiding  over  the  spiritual  interests 
of  exceptional  charactei's. 

Although  Abraham  may  have  been  accustomed  to 
the  use  of  money  in  his  native  land,  and  it  may  have 
been  in  use  even  before  his  time  at  Babylon,  Nineveh 
and  Memphis,  as  well  as  at  Sidon  and  Tyre,  there  is 
no  doubt  that  the  use  of  it  was  in  his  time  more 
familiar  to  the  Phenicians,  from  their  position  as  the 
merchants  of  the  world,  than  to  any  other  people; 
and  at  the  time  Abraham  sojourned  in  Egypt,  there  is 
reason  to  believe  that  a  large  portion  of  the  city  of 
Memphis  was  occupied  exclusively  by  the  Phenician 
merchants  as  a  sort  of  colony ;  they  were  not  permit- 


OFMONEY.  13 

ted  to  establish  colonies  in  Egypt,  but  a  part  of  the 
great  city  was  assigned  to  them ;  and  the  uses  of  gold 
and  silver,  as  well  as  the  custom  of  w^eighing  these 
metals,  were  then  as  familiar  in  Egypt  as  they  seem 
to  have  been  in  the  neighborhood  of  Sidon,  where  the 
sacred  record  mentions  the  use  of  ''current  money." 
Silver  appears  to  liave  been  the  metal  generally  used 
for  purposes  of  money  at  that  time;  or  it  may  have 
been,  as  it  is  yet  in  China,  the  principal  circulating 
medium.  Gold  was  more  Inghly  prized  for  mak- 
ing ornaments,  than  for  use  as  money;  and  the 
Oriental  nations  have  continued,  in  all  ages,  to  set 
this  superior  value  upon  gold,*  making  use  of  silver 
for  purposes  of  money  and  of  gold  for  ornaments. 
The  use  of  both  metals  for  ornaments  has  been  found 
so  general  among  every  aboriginal  people,  that  it 
may  be  supposed  to  have  preceded  the  use  of  them 
for  purposes  of  money ;  for  these  metals  are  always 
discovered  in  new  countries  near  the  surface  of  the 
earth.  Being  more  beautiful  than  other  metals,  as 
\vell  as  more  easily  worked  and  more  durable,  they 
naturally  become  favorites  for  ornaments,  and  hence 

*  The  British  Government  is  now  attempting  to  introduce  gold  coin,  as  a  current 
money,  into  its  colonies  in  India. 


14  NATURAL    HISTORY 

the  fact  that  in  many  newly  discovered  countries  the 
savage  inhabitants  have  been  found  with  gold  and 
silver  ornaments  and  implements,  although  ignorant 
of  the  use  of  iron.  Indeed,  it  is  generally  considered 
that  the  use  of  silver  and  gold  preceded  the  use  of 
iron  in  the  earliest  stages  of  organized  society. 

In  addition  to  the  beauty  and  malleability  of  the 
precious  metals,  their  freedom  from  waste  in  working 
them,  and  their  comparative  exemption  from  rust, 
were  doubtless  discovered  to  be  among  their  most 
excellent  qualities,  as  in  our  own  time,  in  the  estima- 
tion of  civilized  as  well  as  uncivilized  communities ; 
and  having  thus  become  precious  for  purposes  of 
ornament,  descending  from  one  generation  to  another 
as  keepsakes  or  as  w^ealth,  the  way  was  naturally 
prepared  for  their  use  as  money. 

2.  That  mercantile  superiority,  which  the  Pheni- 
cians  won  by  virtue  of  their  preeminent  genius  for 
discovery,  adventure  and  enterprize,  was  rendered  of 
long  duration,  doubtless,  by  means  of  the  knowledge 
of  the  immense  power  which  money  exerts  in  promo- 
ting trade  and  commerce ;  and  although  it  was  cus- 
tomary with  them,  as  with  nearly  all  men,  to  preserve 
among  themselves    exclusively  the  knowledge    by 


OF    MONEY 


15 


wliicli  tlieir  great  business  enterprises  were  rendered 
successful,  enough  has  transpired  to  prove  that  the 
keeping  in  hand  quantities  of  the  precious  metals, 
greater  in  proportion  to  the  amount  of  their  other 
wealth  than  those  kept  by  other  merchants  of  antiq- 
uity, was  one  of  the  chief  sources  of  their  long- 
continued  mercantile  prosperity.  Their  stores  of. 
wealth  and  commodities  were  at  first  at  Sidon  ;  but 
Tyre  eventually  eclipsed  the  mother  city.  Manufac- 
tories existed  along  the  sea  coast,  near  both  cities, 
and  so  dense  was  the  population  that  for  fifteen  or 
eighteen  miles  the  shore  presented  the  appearance  of 
one  great  city  extending  that  distance.  The  extent 
of  the  trade  of  Tyre,  the  glory  of  the  cit}^,  the  valua- 
ble productions  found  in  her  markets,  and  the  high 
degree  of  development  which  the  arts  had  attained 
among  her  people,  are  described  in  glowing  language 
by  the  prophet  Ezekiel. 

One  fact  is  worthy  of  remark,  as  to  the  policy 
which  seems  to  have  governed  the  Phenicians,  and 
that  is  the  extraordinary  perseverance  which,  through- 
out their  whole  history,  they  displayed  in  extending 
their  commercial  enterprises  to  new  countries.  JSTot 
content    with    lininor    the    Mediterranean   and    the 


16  .         NATURAL    HI  STOET 

adjacent  shores  of  the  Atlantic  with  their  trading 
posts,  they  extended  them  along  the  shores  of  the 
Red  sea,  the  Persian  gnlf,  and  even,  it  is  asserted  hy 
some  Avriters,  around  the  whole  of  the  African  conti- 
nent, before  Eome  had  an  existence.  It  was  this 
system  of  exploring,  colonizing  and  developing  the 
•resources  of  new  countries  w^hicli  enabled  them  to 
procure  large  quantities  of  gold  and  silver,  these 
metals  being  found  in  new  countries  on  or  near  the 
surface  of  the  earth. 

The  commercial  enterprises  of  thirty-eight  centuries 
can  be  traced  through  successive  changes,  down  to 
our  own  time,  from  the  hands  of  the  people  to  whom 
Abraham  paid  "current  money,"  and  in  all  that  time 
there  has  been  no  permanent  alteration  in  the  system 
of  valuing  money  in  trade  between  civilized  nations, 
or  between  people  of  different  civilized  nations.  It 
has  ever  since,  and  is  to-day,  valued  by  w^eight  and 
fineness  in  international  dealings.  Other  metals 
beside  silver  have  been  used  to  make  money;  for 
internal  trade  among  their  own  people  some  nations 
have  used  commodities  other  than  metals,  as  well  as 
paper  money,  or  credit,  but  in  the  settlement  of 
balances  of  trade,  or  in  liquidating  differences  in  the 


OFMONET.  17 

prices  of  commodities  exchanged  between  civilized 
nations,  no  substance  has  been  found  to  take  the 
place  of  money  composed  of  the  precious  metals — 
gold  and  silver — as  a  universal  "current  money." 
It  may  be  said  that  the  usages  of  thirty-eight  centu- 
ries among  civilized  as  well  as  semi-civilized  nations 
have  made  these  metals  the  current  money  of  the 
world. 

3.  Gold  or  silver  having  been  selected  for  the  pur- 
poses of  money  by  the  common  consent  of  the  more 
civilized  nations  since  the  time  of  Abraham,  the 
value  of  that  money  having  continued  to  be  deter- 
mined by  w^eight  and  the  purity  of  the  metal,  and 
I  nioney^omposed  of  these  metals  being  the  only  kind 
which  can  be  denominated  the  currency  of  the  world, 
it  follows  that  so  far  as  money  exerts  any  direct 
influence  upon  international  trade,  it  is  only  this  kind  , 
of  money,  composed  of  these  metals,  which  can  be  \ 
considered  as  exerting  that  influence.!  It  is  true  that 
some  other  kind  of  money — as  shells,  beads,  paper, 
etc. — nsed  in  the  internal  dealings  of  the  people  of 
one  nation,  may  exert  an  indirect  influence  upon  the 
trade  between  that  nation  and  other  nations,  but  such 
money,  not  being  acceptable  to  all  nations,  cannot  be 
1* 


18  NATURAL    HISTORY 

considered  to  enter  into  the  international  trade.  Tlie 
/  time  will  doubtless  come,  wlien  by  mutual  association 
'  of  the  civilized  peoples  of  the  world,  by  the  action  of 
tlieir  governments,  a  circulating  medium,  based  on 
I  the  credit  of  all  the  nations,  may  be  sup23lied  for 
1    facilitating  international  ti*ade. 

That  kind  of  money  which  is  composed  of  the 
precious  metals,  being  acceptable  to  all  the  rich  com- 
m-ercial  nations,  flows  like  water  seeking  a  levc^l, 
from  one  nation  to  another,  overcoming  every  device 
which  human  ingenuity  has  been  able  to  discover  for 
permanently  restraining  it:  its  movements  may  be 
interrupted  or  impeded  for  a  time  by  remarkable 
events,  national  laws  or  customs,  precisely  as  an 
individual  may  hoard  it  while  he  lives,  but  with  the 
same  certainty  that  eveiy  man  loses  control  of  his 
hoards  when  time  ceases  to  measure  the  duration  of 
his  existence,  so  every  nation  that  makes  or  amasses 
more  than  its  average  share  of  the  money  of  the 
world,  sooner  or  later  finds  the  undue  accumulation 
overflow  all  restraints  of  law  and  custom,  until  the 
supply  is  reduced  to  the  quantity  which  the  business 
systems  of  that  nation  may  require  to  place  the  whole 
volume  of  its  money  upon  a  level  w^ith  the  average 


OF    MONEY.  19' 

required  by  the  business  systems  of  all  other  nations. 
And  the  converse  of  this — that  a  deficiency  of  money 
in  any  one  nation,  below  that  average,  is  supplied  by 
the  flow  of  money  from  all  other  nations,  to  that  one — 
is  equally  true.  These  movements  of  the  money  of 
the  world  result  from,  or  are  caused  by  the  natural 
laws  of  trade.  These  laws  govern  the  currency  of  a 
community  of  persons  precisely  in  the  same  way  that 
they  govern  the  currency  of  the  nations:  a  person 
who ^ will  give  for  the  money  in  his  neighborhood  a 
larger  amount  of  labor  or  a  greater  quantity  of  pro- 
perty than  any  other  person,  commands  or  procures 
tliat  money,  and  hence  it  is  that  their  money  may  be 
considered  the  common  property  of  all  the  people 
residing  in  a  civilized  community,  since  no  man 
desires  to  be  compelled  to  keep  it  all  to  himself; 
it  is  useful  to  him  only  when  he  hires  it  out  or  ex- 
changes it  for  property  or  commodities  that  procure 
an  income ;  while  he  holds  it,  it  produces  no  income. 
All  the  money  in  a  civilized  community  is  usually 
oiFering  itself  to  whoever  by  industry  or  trade  may 
be  able  to  purchase  it  with  the  most  labor  or  property 
or  commodities;  and  the  money  of  the  whole  world 
is  also  offering  itself  in  the  markets  of  the  nations  to 


20  NATURAL    HISTORY 

whoever  will  give  for  it  the  greatest  quantity  of 
commodities  or  property.  Or,  in  other  words,  money 
is  the  complete  slave  of  a  great  law  which  compels  it 
always  to  seek  those  markets  where  it  can  obtain  the 
largest  quantity  of  property  and  commodities,  and 
the  most  labor,  at  the  lowest  price,  or  for  the  smallest 
quantity  of  itself.  Money,  therefore,  is  not  the  ex- 
clusive property  of  any  one  nation  nor  of  any  one 
individual,  but  on  the  contrary,  the  money  of  the 
world  is  the  common  property  of  all  the  nations, 
precisely  as  the  money  of  a  civilized  community  is 
the  common  property  of  all  the  people  in  that  com- 
munity. Although  a  man  may  be  so  poor  that  he 
cannot  call  any  thing  his  own  but  the  garments 
which  protect  him  from  the  wet  and  the  cold,  if  he 
be  an  honest  man  and  possess  the  health  and  strength 
of  body  and  mind  requisite  for  performing  labor  of 
the  hands  or  of  the  head,  the  money  belonging  to  the 
people  around  him  offers  itself  to  him,  to  reward  his 
labor  and  his  toil,  as  readily  in  proportion,  as  it 
would  offer  itself  to  him  for  lands  and  houses,  had 
he  millions  of  them  for  sale;  and  in  a  country  blessed 
with  lionorable  peace,  where  the  laws  are  just,  and 
wise,  and  good  men  govern,  such  a  man,  if  young  and 


OFMONEY.  21 

strong,  may  "save  and  have"  even  to  the  extent  of 
becoming  a  millionaire. 

In  conclusion,  it  may  be  asserted  that  in  a  free 
country,  under  good  government  and  wise  laws, 
money  is  always  offering  itself  to  whoever  will  work 
best,  or  give  the  most,  for  it;  that  it  is  an  instrument 
of  trade  belonging  to  the  whole  world,  circulating 
among  the  nations  of  the  world,  as  their  common 
property ;  and  that  if  wars  and  misgovernment  did 
not  ravage  communities  and  destroy  nations,  there 
would  be  in  the  lapse  of  time,  through  the  influence 
of  the  natural  laws  governing  money,  with  the  ex- 
tension of  civilization  and  religion,  a  complete 
equalization  of  the  wealth  of  the  world  among  the 
people  of  ail  the  civilized  nations. 


caliporma. 


CHAPTEE  II. 

1.  Usefulness  of  Monet.     2.  Natural  Discovery   of  it  from  the 
requirements  of  society.     3.  various  kinds  of  money  used 

IN   DIFFERENT   AgeS   AND    COUNTRIES. 

1.  The  inventor  of  money  is  unknown,  but  that 
does  not  detract  from  the  importance  of  the  discovery. 
Many  distinguished  persons  of  ancient  times — gods, 
demi-gods,  sages  and  magi — ^liave  been  named  as  the 
inventors  of  it.  The  discovery  was  probably  made 
by  several  persons  in  different  countries  and  at  differ- 
ent times,  without  a  know^ledge  of  the  discovery  by 
any  one  becoming  known  to  any  other,  for  with  our 
modern  experience  of  its  great  usefulness,  and  of  the 
difficulty  of  attaining  to  an  exalted  civilization  with- 
out the  employment  of  such  a  device  for  conducting 
the  exchange  of  property  and  commodities,  it  is  easy 
to  comprehend  the  possibility  of  the  spontaneous  in- 
vention of  it  by  a  community  possessing  sufficient 

(28) 


254  KATUKALHISTORT 

intelligence  to  make  implements  of  luisbandiy,  or 
measures  of  capacity,  time  and  length.  The  useful- 
ness of  money  is  illustrated  with  remarkable  clearness 
in  the  "  Wealth  of  Nations^^  by  Adam  Smith,  who 
observes  that  without  an  instrument  like  money  "the 
man  who  wanted  to  buy  salt,  for  example,  and  had 
nothing  but  cattle  to  give  in  exchange  for  it,  must 
have  been  obliged  to  buy  salt  to  tlie  value  of  a  whole 
ox,  or  a  whole  sheep,  at  a  time."  By  liaving  an 
exchangeable  commodity  w^hich  can  be  divided  into 
very  small  portions  without  loss  or  waste,  only  a 
small  quantity  of  articles  is  needed  to  be  kept  on 
hand  for  supplying  the  wants  of  a  family,  as  we  see 
in  this  illustration,  where,  without  money,  an  article 
like  salt  would  require  the  farmer  to  keep  an  ox  or  a 
sheep  on  hand  ready  to  be  exchanged  for,  or  to  re- 
plenish his  supply  of  it.  Hence  it  is  obvious  that 
although  communities,  in  common  with  individuals, 
may  in  one  sense  lose  something  by  having  to  keep  a 
portion  of  their  w^ealth  in  ready  money,  without  hav- 
ing any  income  from  it,  if  the  instrument  of  money 
did  not  exist  there  would  be  required  a  much  larger 
amount  of  unproductive  capital  to  meet  their  current 
wants.     In  fact,  without  money,  people  would  all  be 


OFMONEY.  25 

compelled  to  deal  at  wholesale,  by  barter ;  and  retail 
transactions  as  they  are  now  known,  would  be  almost, 
if  not  altogether,  impracticable. 

2.  Among  an  intelligent  people  having  genius  to 
devise  means  for  saving  time  and  labor,  any  article 
easily  transferred  from  hand  to  hand,  divisible  into 
small  portions  and  capable  of  being  reunited  without 
waste  in  the  division  and  reiinion,  of  known  worth 
and  universally  acceptable  at  that  worth  to  persons 
in  all  kinds  of  trade,  would  naturally  become  money, 
by  common  consent,  in  order  to  save  the  trouble, 
delay  and  vexation  of  exchanging  bulky  commodities. 
Devices  of  this  character  have  been  emj:)loyed  in 
almost  every  organized  community  where  the  use  of 
the  precious  metals,  or  real  money,  could  not,  from 
ignorance  or  risks  or  scarcity,  be  resorted  to.  In 
civilized  communities,  where  high  standards  of 
morality  have  prevailed,  such  devices  have  been 
made  to  conform  more  nearly  to  the  requirements  of 
justice,  than  among  savage  tribes. 

3.  A  chief  of  the  North  American  Indians  is  said 
to  have  used  his  hand  or  foot  as  a  weisrht  for  reculat- 
ing  the  exchangeable  value  of  commodities  within  his 
jurisdiction;    and  among  the  same   race  pieces  of 


86  NATURAL    HISTORY 

shells  continue  to  be  used  as  money,  the  making  of 
the  shells  into  money  called  "wampum"  being  still 
carried  on  near  New  York,  by  skilled  work-people, 
generally  the  descendants  of  those  Hollanders  who, 
when  they  settled  I^ew  Amsterdam,  found  lucrative 
employment  in  the  manufacture  of  this  shell  money 
for  the  trade  with  the  aboriginal  inhabitants  of  Korth 
America.  >Ye  can  boast  that  this  one  of  our  do- 
mestic manufactures,  now  as  old  as  the  celebrated 
settlement  of  Communijpaw^  on  the  west  side  of  the 
bay  of  Kew  York,  has  been  continued  uninterrupted- 
ly about  two  hundred  years! 

Glass  beads,  salt,  soap,  ivory,  leather,  brass,  tin, 
iron,  pewter,  cattle,  tobacco,  paper,  the  cereal  grains, 
as  well  as  other  articles  and  commodities,  and  even 
men  (slaves),  have  been  used  for  purposes  of  money 
in  different  countries  and  at  different  times.  As  late 
as  the  middle  of  the  eighteenth  century,  Adam  Smith 
8ays,  there  was  a  village  in  Scotland  where  wrought 
iron  nails  were  current  money;  and  in  California, 
one  hundred  years  later,  pieces  of  soap  were  current 
money  among  the  native  Indians,  before  the  settle- 
ment of  the  country  and  the  discovery  of  the  gold 
mines  by  civilized  people. 


OF    MONEY.  27 

It  is  customary  in  our  own  time,  in  secluded  towns 
throughout  America  and  Europe^  to  use  book  accounts, 
kept  by  some  person  in  whom  the  neighborhood  has 
confidence,  for  purposes  of  money;  and  it  may  be 
said  tbat  book  accounts,  bills  of  exchange,  orders, 
drafts,  notes,  bills,  cliecks,  and  even  letters  of  credit, 
as  well  as  the  public  securities  of  every  kind,  perform 
the  functions  of  money  in  the  largest  portion  of  those 
vast  monetary  transactions  which  now  constitute  the 
business  of  banks  and  bankers  in  the  leading  marts 
of  commerce  throughout  the  world,  although  these 
devices  for  economizing  the  use  of  real  money  have 
generally  been  classed  by  tlie  economists  under  the 
title  of  "credits,"  or  "the  credit  system,"  and  their 
power  as  money  is  measured  by  the  ratio  of  their 
circulation  or  use,  as  compared  with  the  ratio  of  cir- 
culation or  use  of  real  as  well  as  lawful  money,  in 
any  place.  There  may  be  a  lawful  money  represent* 
itig  that  which  is  a  legal  tender,  and  both  paper 
mone3\ 

"Store-pay"  has  been  resorted  to  as  a  substitute 
for  money — paying  the  wages  of  working  people  in 
commodities  at  stipulated  prices — but  it  is  a  j)ractice 
fraught  with  vexation  to  both  employer  and  employ- 


28  N  A  T  U  K  A  L     II  I  S  T  O  K  Y. 

ed,  resulting  often  in  lieart-biiniin£:s  and  strife:  yet 
it  is  a  practice  which  cannot  be  condemned,  because 
it  may  be  in  some  cases  the  only  possible  mode  of 
rewarding  the  toil  of  an  industrious  people  in  times 
of  great  scarcity  of  ready  money ;  and  it  is  far  pre- 
ferable to  that  deplorable  system,  too  often  resorted 
to  under  such  circumstances,  of  setting  up  a  bank  of 
circulation  without  real  capital,  only  to  break  and 
leave  a  mass  of  worthless  paper  money  in  the  hands 
of  poor  working  people. 


L  1  B  U  A  li  Y 

UNIVKKSITY  OF  i 

CALIFORNIA 


CHAPTEE  m. 

1.  Money  Facilitates  the  Division  of  Labor.  2.  Material  Super- 
iority OF  Nations  Employing  Money — An  Equitable  Monetary 
System  Distinguishes  the  CivrLiZED  from  the  Uxci\tlized. 
8.  A  Civilization  Controlled  by  Justice  and  Equity  Impossible 
WITHOUT  AN  Honest  Monetary  System. 

1.  Trade  and  commerce  may  be  carried  on  by 
barter,  without  the  use  of  money :  but  barter  ceases 
from  the  moment  people  discover  the  importance  of 
that  division  of  labor  by  which  modern  civilization 
has  accomplished  its  most  wonderful  achievements; 
for  it  is  by  dividing  industrial  occupations,  each 
person  applying  himself  to  one  particular  branch, 
that  great  excellence  and  proficiency  are  attained. 
It  is  only  when  this  division  of  labor  is  extended  so 
far  as  to  stunt  the  mental  growth  or  repress  the  phy- 
sical development  of  the  people,  that  it  becomes  at  all 
injurious  to  individual  and  national  welfare.  There 
is  undoubtedly  a  great  hardship  in  being  confined  at 

(29) 


30  NATURAL    HISTORY 

one  single  occupation  tlirongliout  a  whole  life  time, 
bnt  the  mastering  of  a  single  one  of  tlie  sciences  is 
usually  a  life  long  work  for  the  ablest  minds,  and  tins 
hardship  is  repressive  of  individual  energy  onlj^  when 
the  man  does  not  enjo}^  the  prerogatives  of  individual 
sovereignty.  That  is  to  say,  no  honest  occupation 
is  of  itself  grievous  to  any  person  in  a  community 
where  all  the  people  enjoy  perfect  equality  of  politi- 
cal rights.  When  all  the  avenues  of  industry  and 
politics  are  open  to  every  person,  there  is  neither 
oppression  nor  slavery. 

To  understand  the  power  of  money  in  aiding  the 
division  of  labor,  it  is  only  requisite  to  consider  the 
case  of  skilled  workmen  in  civilized  communities 
w^here  this  division  has  been  carried  to  a  high  state 
of  development:  were  one  of  these  men  unable  to 
obtain  the  reward  of  ready  money  for  his  work,  and 
were  he  compelled  to  go  around  among  his  neighbors 
to  exchange  the  products  of  liis  industry  by  barter, 
for  those  articles  needed  to  promote  the  comfort, 
convenience  and  happiness  of  himself  and  family,  he 
would  lose  so  much  time  that  he  would  soon  find 
himself  deprived  of  a  livelihood  by  the  competition 
of  w^orkmen  who  were  paid  in  ready  money.     The 


OF    MONEY.  31 

time  lost  by  liim  in  bartering,  which  is  a  very  slow 
process  of  trade,  would  be  a  gain  to  them.  Suppos- 
ing that  he  lost  one-third  of  his  time  in  bartering,  he 
could  make  half  as  many  more  productions  under  the 
ready  money  system;  and  if  he  could  find  a  person 
having  ready  money  to  give  him  for  his  productions 
as  fast  as  he  could  make  them,  he  could  sell  to  that 
person  for  ready  money  at  lower  prices  than  he  could 
afford  to  sell  by  barter;  and  it  is  in  this  way  that  the 
man  who  has  money,  and  the  man  who  labors,  be- 
come partners,  and  employer  and  employed,  to  the 
great  advantage  of  each.  And  it  is  in  this  way  that 
money  promotes  the  division  of  labor,  and  augments 
the  power  of  labor  in  an  eminent  degree,  to  the  great 
advantage  of  the  laborer  and  the  community  in  which 
he  resides. 

2.  If  nations  as  well  as  individuals  are  so  much 
benefited  by  the  employment  of  money,  it  follows 
that  every  nation  which  neglects  to  maintain  an 
equitable  monetary  system,  must  be  in  a  great  degree 
inferior  in  economical  resources  to  those  nations 
which  preserve  such  a  system,  exactly  like  those 
semi-barbarous  or  half  civilized  nations  which  neor- 

o 

lect  or  refuse  to  adopt  the  inventions  and  improve- 


SI 


NATURAL    HISTORY 


inents    discovered    by   the    more    enlightened    and 
civilized. 

Money  having  been  found  to  promote  the  division 
of  labor,  the  moment  it  is  employed  for  this  purpose 
there  begins  to  be  an  accumulation  of  capital  from 
the  savings  which  the  increased  efficiency  of  labor 
renders  practicable:  and  since  it  is  only  by  labor  that 
the  wealth  which  the  Creator  has  placed  in  the  earth 
can  be  gathered,  preserved  and  distributed,  therefore 
whatever  increases  the  efficiency  of  labor  increases 
also  the  wealth  of  any  people.  Accumulated  capital 
consists  of  those  items  of  wealth  which  labor  did  not 
consume  while  collecting,  or  producing  enough  for 
the  supply  of  the  immediate  wants  of  the  laborers, 
as  in  the  case  of  the  surplus  which  a  farmer  has  re- 
maining  after  providing  for  the  requirements  of  his 
family  and  his  farm:  so,  also,  in  the  case  of  an  indi 
vidual  who  attains  to  great  proficiency  in  any 
occupation,  his  accumulation  of  wealth  is  the  reward 
of  his  ability  to  accomplish  more  than  his  neighbors, 
and  this  accumulation  of  wealth  is  the  surplus  or 
savings  of  his  labor,  wliich  he  may  store  away  to 
support  his  family  and  himself,  during  the  infancy  of 
his  children,  or  in  the  decrepitude  of  his  own  declin- 


OF    MONEr.  33 

ing  years.  Thus  the  feebleness  of  infancy,  in 
common  witli  the  infirmity  of  old  age,  may  be  made 
to  pass  through  a  scene  of  comfortable  rest  by  means 
of  the  savings  of  labor,  or  the  accumulation  of 
wealth.  Hence  a  great  increase  in  the  duration  of 
human  life  since  the  dark  ages,  in  all  the  civilized 
Christian  nations.  And  what  is  true  in  this  case  of 
an  individual  is  true  also  of  nations.  A  nation  in 
which  the  division  of  labor  has  attained  to  superiori- 
ty over  that  in  other  nations,  obtains  increased 
wealth,  or  more  of  the  product  of  the  labor  of  other 
nations  than  was  possible  before  that  superiority  was 
attained;  for  example,  that  wonderful  labor  saving 
contrivance,  the  sewing  machine  needle,  recently 
invented  by  Elias  Howe,  Jr.,  has  enabled  one  person 
to  do  the  work  that  formerly  required  twenty-five 
persons,  or  more.  Some  writers  have  estimated  the 
work  of  a  single  sewing  machine  as  high  as  the  labor 
of  one  hundred  persons.  The  labor  saving  machinery 
of  a  single  manufacturing  city  of  modern  times  — 
such  as  Lowell,  in  Massachusetts — is  equal  to  the 
manual  labor  of  a  whole  nation,  as  productive  in- 
dustry was  conducted  in  ancient  times,  with  spinning 
wheels,  handlooms,  etc.     It  has  been  asserted,  and  it 


34  NATURAL     HISTORY 

is  generally  believed,  that  Great  Britain  possesses 
manufacturing  machinery,  for  the  making  of  textile 
fabrics,  which  could  supply  material  enough  to  clothe 
the  bodies  of  all  mankind  decently  and  comfortably. 
Great  Britain  has  attained  to  such  productive  power 
by  various  means;  but  the  division  of  labor,  main- 
tained through  a  monetary  system  of  great  efficiency, 
has  not  been  the  least  powerful  of  these  means. 

It  may  be  said  that  in  the  results  produced  by 
labor  saving  machinery,  the  century  ending  with  the 
first  half  of  the  nineteenth  has  witnessed  a  greater 
material  development  among  the  civilized  nations 
than  took  place  in  any  preceding  ten  centuries  of  the 
historic  era;  for  these  results  have  rendered  it  no 
longer  possible,  it  may  be  supposed,  that  the  barbar 
ous  populations  should  again  menace  with  total 
annihilation,  in  the  manner  they  have  so  often 
threatened,  the  nations  most  highly  civilized.  When 
the  hordes  of  the  Asiatic  hills  and  steppes  can  pro- 
duce a  five  hundred  pound  rifled  gun,  and  the 
fanatical  tribes  of  Arabia  build  an  iron  steam-ship  of 
ten  thousand  tons;  when  the  South-sea  Islands  eclipse 
the  maritime  skill  of  Christendom,  and  the  savage 
Indians  of  North  America  o^o  to  makins:  rail  roads 


OFMONEY.  35 

and  steam  engines;  when  tlie  cannibals  of  Africa  can 
manufacture  minnie  rifles  for  well-drilled  armies  nnra- 
bering  millions  of  their  own  race,  and  the  blacks  of 
Kew  Holland  build  steam  ploughs;  and  when  the 
Cliinese  have  horse  rail  roads  in  the  principal  streets 
of  Canton  and  Pekin,  and  the  Hindoos  go  to  making 
the  richest  cashmere  shawls  with  a  steam-machine 
which  shall  be  an  ahglo  American  cross  with  East 
Indian  improvements — a  kind  of  half  New  York 
sewing  machine,  and  half  Manchester  cotton-loom — 
then  indeed  may  Christianity  and  civilization  quail 
again,  as  they  once  did,  before  savage  hordes  threat- 
ning  the  heart  of  the  civilized  world. 

That  extraordinary  intellectual  and  physical  de- 
velopment, which  western  Europe  experienced  from 
the  discovery  of  America,  is  in  a  great  degi'ee 
traceable,  so  far  as  influences  purely  material  are 
concerned,  to  the  superiority  of  the  monetary  systems 
introduced  by  the  augmented  supplies  of  the  precious 
metals  flowing  from  this  new  world.  When  we 
reflect  upon  what  we  witness  in  our  own  day,  in  the 
waning  resources  of  those  ancient  communities  which 
adhere  to  systems  of  industry  that  have  remained 
without  improvement    during  thirty  centuries,    as 


36  NATTJKALHISTOEY 

compared  witli  the  growing  wealth  of  the  younger 
people  who  have  adopted  modern  inventions  and 
improvements;  and  then  consider  that  without  an 
equitable  monetary  system — which  is  a  valuable 
invention,  having  modern  improvements  —  a  nation 
is  in  the  same  category,  so  far  as  financial  economy  is 
concerned,  with  those  having  systems  of  industry 
that  remain  to-day  what  they  were  three  thousand 
years  ago,  we  must  conclude  that  such  a  monetary 
system  gives  vigt)r,  strength  and  power  to  the  great 
masses  of  the  people  where  it  exists. 

3.  Without  a  monetary  system  founded  upon  those 
principles  of  justice,  wdiich  recognize  the  right  of 
labor  to  an  equitable  reward  for  its  toil,  people  are 
unable  to  save  and  accumulate  wealth,  every  man's 
property  becomes  subject  to  the  lottery  of  uncertain 
barter,  and  if  a  society  thus  situated  does  not  degen- 
erate into  a  state  of  barbarism,  and  remain  there,  it 
at  least  approaches  to  that  state  by  periodical  con- 
vulsions. The  fluctuations  which  take  place  in  the 
prices  of  property  and  commodities,  as  well  as  the 
wages  of  labor,  in  a  country  having  false  monetary 
systems — like  the  inequalities  in  the  distribution  of 
wealth    where    slavery  or   a  tyrannical    despotism 


OF    MONEY 


37 


prevails— tend  to  unsettle  all  ideas  of  justice  and 
equity  in  the  minds  of  the  large  numbers  of  people 
who  are  plunged  into  frightful  calamities  by  the  vices 
inherent  in  those  systems.  The  loss  of  property  tends 
to  produce  despair  or  recklessness ;  the  deprivations 
of  working  people,  arising  from  a  falsification  of  the 
standard  of  value,  create  wide-spread  discontent;  and 
these  influences,  stimulating  the  public  mind,  at  last 
make  themselves  felt  in  popular  commotions  and 
revolutions,  which  continue  to  agitate  the  body 
politic  sometimes  for  generations  after  the  original 
grievance  is  removed.  Violent  alterations  in  the 
money  of  nations  have  often  produced  popular  tu- 
mults, changes  in  the  administration,  the  overthrow  of 
a  dynasty,  modifications  of  the  constitution,  and  the 
destruction  of  the  form  of  government.  It  is  true 
that  such  events  have  arisen  from  many  other  causes 
than  from  alterations  in  money,  but  in  most  cases,  in 
modern  times,  revolutionary  tendencies  have  been 
evoked,  or  carried  to  completion,  through  influences 
clearly  traceable  to  the  interference  of  governments 
with  the  standard  of  value,  or  to  an  arbitary  exercise 
of  power  which  has  caused  the  wealth  of  the  nation 
to  be  accumulated  by  favored  classes,  to  the  injury 


88  KATTTKAL    HISTORY 

of  the  great  body  of  the  people.  The  domination  of 
a  class,  like  the  government  of  a  rapacious  uncivil- 
ized despotism,  naturally  t.akes  the  form  of  governing 
in  the  interest  of  the  dominant  class,  caste,  or  party ; 
and  tampering  with  the  currency,  special  laws  to 
benefit  the  governing  class,  discriminating  taxation, 
with  efforts  at  the  perpetuation  of  their  power 
through  the  distribution  of  government  patronage 
among  all  who  will  become  their  partizans,  regardless 
of  the  interests  of  the  people,  are  the  means  usually 
resorted  to  by  the  enlightened  but  unscrupulous,  as 
well  as  the  uncivilized  and  despotic,  for  maintaining 
their  hold  upon  the  direction  of  public  affairs.  If 
suddenly  turned  out  of  office  by  the  vote  of  the 
people,  in  a  nation  governed  by  a  free  constitution,  or 
by  the  exercise  of  the  power  of  the  monarch  in  a 
monarchial  or  despotic  country,  a  class  sometimes 
rebels,  or  attempts  revolution.  It  has  often  happened 
that  the  constitution  has  been  violated,  or  the  form 
of  government  changed,  by  a  class,  while  in  power, 
the  people  having  to  submit,  or  to  get  the  restoration 
of  their  rights  by  prolonged  struggles,  in  which 
monarchs,  as  well  as  popular  leaders  have  become 
the  champions  of  the  people  against  unprincipled  and 


OFMONEY.  39 

rapacious  tyrants ;  an  emperor,  or  a  king,  or  a  queen, 
having  in  such  circumstances  been  found  capable, 
more  than  once,  of  rescuing  a  people  as  efficiently  as 
a  popular  leader. 

A  civilization  or  government  guided  by  justice  is 
as  impossible  without  an  equitable  measure  of  ex- 
changeable value,  as  it  is  without  honest  standards 
of  weight  and  uniform  measures  of  capacity  and 
length.  Were  the  pound  weight,  the  yard-sticlc, 
the  quart  measure,  or  the  bushel  and  all  other 
weights  and  measures  incessantly  changing,  as  a 
false  monetary  standard  always  is,  there  could  not  be 
either  settled  industry  nor  civilized  society,  and  if 
such  injustice  could  possibly  be  enacted  by  law  in  an 
enlightened  community,  the  people  would  speedily  fall 
into  that  state  of  savage  life,  in  which  the  law  of  the 
strongest  is  the  supreme  arbiter  of  right.  Quiet 
submission  to  such  a  calamity  might  arise  from  the 
ignorance  of  a  people  whose  subjugation  would  be 
impossible  in  any  other  mode.  But  the  subjugation 
could  be  permanent  only  where  ignorance  had  de- 
throned reason  or  physical  degenercy  had  unmanned 
the  people.  The  first  syotoms  of  an  effort  among 
savage  tribes  to  convert  themselves,  or  to  become 

/ 
I.- 


^.  NATURAL    HISTORY 

converts  to  civilized  life,  usually  appear  in  the  making 
of  laws  to  preserve  to  every  man  bis  right  to  the 
wealth  which  he  may  accumulate  in  the  rewards  of 
his  own  labor;  and  hence  these  laws  always  make 
provision  for  standards  of  weight  and  capacity  and 
length,  and  the  standard  of  value,  or  money.  This  is 
one  of  the  invariable  evidences  of  advancing  civiliza- 
tion. So,  on  the  other  hand,  the  decay  of  civilization 
is  invariably  indicated  by  a  laxity  of  moral  principle 
in  regard  to  property  and  financial  economy,  and 
unjust  changes  in  the  policy  of  legislation  regulating 
the  monetary  system,  and  the  creation,  accumula- 
tion and  distribution  of  wealth.  Sometimes  this 
decay  appears  in  violations  of  the  laws,  as  in 
bribes  to  judges,  bounties  for  permitting  smuggling, 
largesses  to  brigands,  the  toleration  of  organized 
banditti,  or  the  granting  of  special  monopolies 
through  the  exercise  of  partizan  influence  in  the 
government,  regardless  of  the  rights  and  interests  of 
the  people  governed.  Eeligion  and  education  are 
usually  subverted,  or  greatly  corrupted,  before  these 
last  named  outrages  become  possible;  for  it  is  only 
by  cherishing  religion,  and  by  the  dissemination 
of  knowledge  among  all  the  people  through  liberal 


OFMONEY.  41 

educational  systems,  that  a  community  can  be  pre- 
served from  sucli  destructive  influences.  Toleration 
of  religious  opinions  at  variance  with  our  own,  is 
indispensable  to  the  tranquility  of  modern  society  in 
all  enlightened  countries,  and  the  toleration  of  differ- 
ences of  opinion  as  to  party  politics  is  no  less 
indispensable  to  the  harmonious  administration  of 
government  among  a  free  people ;  for  the  proscrip- 
tion of  loyal  individuals  because  of  differences  of 
opinion  upon  non-essentials,  23repares  the  way  for 
those  violent  party  strifes  which  too  often  terminate 
in  civil  wars  and  revolutions.  There  is  no  grievance 
so  formidable  that  it  cannot  be  remedied  under  a  free 
system  of  government  by  patient  appeals  to  the 
people,  and  by  compromise :  the  case  of  negro 
slavery,  for  example,  might  have  been  adjusted  by 
compromise,  without  civil  war,  by  the  creation  of  a 
national  debt  to  purchase  and  liberate  the  slaves, 
which  would  have  been  infinitely  preferable  to  the 
calamity  that  fell  upon  this  country  through  the 
attack  of  the  slave  holding  interest  upon  the  national 
life.  Elihu  Burritt,  commonly  known  as  the  "Learn- 
ed Blacksmith,"  proposed  this  mode  of  adjusting  the 
slavery  question  several  years  before  the  rebellion 


42  NATURAL    HISTORY. 

of  the  slave  owners.  It  may  be  asserted  of  the 
government  of  a  free  and  enlightened  people,  that 
there  is  no  grievance  which  conciliation  and  com- 
promise, with  the  aid  of  time  and  patience,  cannot 
remove.  Conciliation  and  compromise  are  infinitely 
preferable  to  "the  last  resort,"  since  it  sometimes 
happens  that  even  a  good  cause  is  lost  for  generations 
by  an  untimely  appeal  to  arms.  Generally,  however, 
a  bad  cause  brings  swift  destruction  upon  itself  by 
its  own  aggressions,  against  which  a  great  and  free 
people  may  be  forced  to  defend  themselves,  with  all 
that  noble  patriotic  valor  which  has  distinguished 
this  people  in  defending  themselves  against  the  war 
commenced,  in  1861,  by  the  slave  owning  interest. 

Having  thus  glanced  at  early  historical  references, 
the  usages  of  civilized  countries,  and  the  general 
characteristics  and  influences  of  money,  it  is  proposed 
to  enter  upon  a  more  minute  investigation  of  its 
characteristics,  and  for  the  purposes  of  this  inquiry, 
to  divide  these  characteristics  into  six  classes,  termed 
attributes,  so  as  to  embrace  every  distinct  form  in 
which  it  performs  its  functions,  or  displays  its 
power. 


I     Li  B  U  A  i ;  i 

UNiVEKSJTi'   OF 

'ALIFORNIA. 

CHAPTEE  IV, 

Thk  First  Attribute  of  Money;    a  Commodity,  and  its  Relation- 
ship TO  other  Commodities. 

Gold  and  silver  were  originally  used  as  money 
without  being  made  into  coins,  passing  by  weight, 
as  commodities  which  man  included  among  the 
various  articles  that  constituted  his  wealth.  If  by 
common  usage  any  useful  article  were  made  to  per- 
form the  offices  of  a  measure  of  the  prices  of  all 
other  articles,  it  would  not  cease  to  be  a  commodity 
by  becoming  money ;  on  the  contrary,  it  would 
remain  a  commodity,  subject  to  the  law  of  supply 
and.  demand,  only  all  prices  of  property  would  be 
represented  by  quantities  of  it.  Indeed,  it  may  be 
said  that  any  one  valuable  and  exchangeable  commo- 
dity that  man  possesses  in  large  quantities,  is  to  a 
certain  extent  the  measure  of  the  prices  of  all  other 
commodities  and  property,  causing  prices  of  other 
things  to  rise  or  fall  with  the  increase  or  decrease 

(48) 


44  NATURAL    HISTORY 

of  the  quantity  of  itself.  For  example,  any  one 
substance  used  for  food,  for  clothing  or  for  fuel, 
■when  it  becomes  very  abundant  or  very  scarce, 
exerts  an  immediate  effect  upon  the  prices  of  other 
substances  to  which  it  has  economical  relationships, 
and  if  this  effect  upon  such  prices  were  usually 
stated  in  increased  or  diminished  quantities  of  that 
one  substance,  we  would  have  in  the  prices  thus 
stated  fluctuations  analogous  to  those  which  take 
place  in  the  money  prices  of  all  commodities,  wages 
and  property,  from  the  increase  or  decrease  of  the 
quantity  of  money.  It  is  also  true  that  any  one 
cojnmodity  might  be  selected  as  the  center  of  the 
economy  of  the  whole  world,  as  well  as  of  a  nation, 
and  the  fluctuations  in  quantity  peculiar  to  that  one 
commodity,  producing  corresponding  fluctuations  in 
prices  of  all  the  others,  might  be  cited  in  proof  of 
the  controlling  power  of  that  one  over  them  all, 
when  in  fact  this  illustration  would  only  prove  that 
every  commodity,  precisely  like  that  one,  exerts  an 
influence  upon  all  the  rest,  and  is  itself  influenced 
by  all  the  rest,  in  its  increase  or  decrease,  its  price, 
its  supply  and  consumption.  Money  is  not  an  ex- 
ception to  this  rule.     It  is  also  a  commodity.     But 


OF    MONEY.  45, 

there  are  differences  between  it  and  other  commo- 
dities which  arise  from  the  characteristics  which  it 
possesses  as  an  instrument  of  trade,  an  article  of 
wealth,  a  measure  of  value,  an  equivalent  and  a  sign. 
Without  these  characteristics  it  would  cease  to  be 
money. 

Adam  Smith  says:  "Money  has  become  in  all 
civilized  countries  the  universal  instrument  of  com- 
merce, by  the  intervention  of  which  goods  of  all 
kinds  are  bought  and  sold  or  exchanged.  Iron  was 
the  common  instrument  of  commerce  among  the 
ancient  Spartans,  copper  among  the  ancient  Romans, 
and  gold  and  silver  among  all  rich  and  commercial 
nations."  Great  injustice  has  been  done  to  the  views 
of  Adam  Smith,  and  incalculable  mischief  has  been 
wrought,  by  considering  this  idea  of  an  "instrument" 
to  be  a  true  and  complete  definition  of  money,  or  by 
misunderstanding  this  definition,  because  it  apparent- 
ly (not  really)  conceals  those  higher  attributes  of 
money  which  are  displayed  in  its  performing  the 
functions  of  a  measxire  of  value ^  an  equivalent,  &c. 
Tliis  definition  also  seems  to  ignore  the  characteristics 
of  money  as  a  commodity.  Considered  only  as  an 
"instrument,"  all  that  seems  requisite  to  satisfy  the 


46  NATURAL    HIS  TOKY 

demands  of  justice  is  that  the  instrument  be  made  by 
the  government,  thus  giving  the  people  of  a  nation 
the  profit  arising  from  the  making  of  an  article  so 
genei-ally  used  by  all  classes,  and  hence  the  custom, 
in  ancient  and  modern  times,  of  conferring  upon  the 
supreme  government  the  sole  power  of  making 
money.  It  is  a  self-evident  truth,  that  if  no  other 
purpose  were  to  be  subserved  by  money,  than  that 
of  a  useful  instrument,  the  making  of  it  in  unlimited 
quantities  by  the  government,  and  of  the  least  valu- 
able materials,  would  be  an  advantage  to  all  the 
people,  as  well  as  a  substitute  for  taxation,  since,  to 
the  extent  to  which  it  might  be  made,  it  would  re- 
duce the  amount  of  taxes  required  from  the  people, 
and  governments  under  Presidents,  Kings,  Queens 
and  Emperors  might  be  as  rich  as  they  pleased :  there 
would  be  no  limit  to  the  making  of  money,  under 
such  circumstances,  for  if  it  were  beneficial  to  make 
it  in  this  way,  there  could  not  be  too  much  of  so 
desirable  an  "  instrument "/  It  was  this  idea  which 
caused  money  to  be  made  of  pieces  of  leather  bearing 
the  government  stamp  in  ancient  times,  and  it  is  the 
same  idea  which  in  modern  times  has  caused  money 
to  be  made  of  materials  nearly  worthless,  by  or  under 


OF     MONEY.  4:7 

authority  of  governments.  It  cannot  be  8n23po8ed 
that  the  great  mind  of  Adam  Smith  really  enter- 
tained the  false  conception  of  money  —  that  it  is  only 
an  instrument — which  this  definition  has  been  made 
to  convey  to  the  minds  of  so  many  people  and 
nations ;  for  the  whole  tenor  of  his  writings  upon  the 
nature  and  functions  of  money  goes  to  prove,  that  he 
was  familiar  with  those  practical  operations  of  com- 
merce which  establish  the  fact,  that  while  a  civilized 
nation  may  employ  any  substance  or  device  it  pleases 
to  perform  the  functions  of  money  among  its  own 
people,  whenever  it  requires  money  to  pay  balances 
of  trade  to  other  civilized  nations,  it  can  only  employ 
that  kind  of  money  which  other  nations  will  receive, 
and  this,  instead  of  being  "an  instrument,"  must  be 
a  commodity  universally  acceptable  and  valuable  to 
the  other  nations.  It  is  therefore  self-evident  that 
it  is  possible  to  use  a  money  which  answers  the 
purposes  of  "an  instrument"  of  commerce  in  the 
internal  trade  of  a  civilized  nation,  but  which  ceases 
to  be  an  "instrument  of  commerce"  in  the  trade 
with  other  civilized  nations,  and  such  money  is 
proved  to  be  2^  false  "instrument"  of  international 
commerce,  whenever  it  is  made  of  any  thing  that  is 


48  NATURAL    HISTORY 

not  a  commodity  universally  acceptable  and  valuable 
to  all  civilized  nations ;  yet,  in  conceding  that  such 
falsemouey  may  perform  the  functions  of  an  instru- 
ment of  commerce  in  the  internal  trade  of  a  nation, 
it  is  not  intended  to  admit  that  such  money,  false  as 
regards  the  people  of  other  nations,  can  be  wholly 
true  to  the  people  of  the  nation  employing  it.  It 
must  be  observed  that  Adam  Smith  applies  the  term 
money  to  that  which  the  ancient  S])artans  made  of 
iron,  and  the  ancient  Romans  of  copper,  and  to  that 
which  "rich  and  commercial"  nations  make  of  gold 
and  silver,  thus  recognizing  among  rich  and  commer- 
cial nations  tliat  kind  which  is  composed  of  gold  and 
silver,  the  so  called  precious  metals;  in  this  sense  the 
political  economists  usually  employ  the  term  money, 
and  in  this  sense  his  definition  of  money  is  undoubt- 
edly true,  since  money  made  of  the  precious  metals 
is  now  among  all  rich  and  commercial  nations  the 
universal  instrument  of  commerce,  governing  the 
exchangeable  value  of  all  commodities.  That  kind 
of  money  which  is  employed  by  one  nation  for  local 
purposes,  when  made  of  other  substances  than  the 
precious  metals,  and  not  convertible  into  these 
metals  on  demand,  may  be  termed  local  money:  and, 


OFMONET.  49 

when  made  so  by  law,  "legal  tender"  or  "lawful 
money."  Custom,  alone,  may  be  sufficient  to  confer 
the  attributes  of  local  money  upon  substances  or 
commodities  other  than  money  made  of  the  precious 
metals:  paper  bills  of  credit,  in  the  form  of  notes  and 
drafts,  circulated  even  in  defiance  of  law,  and  not 
convertible  into  coined  money,  may  become  local 
mone}^  by  the  common  consent  and  usage  of  the 
people,  in  great  emergencies,  when  no  better  kind  of 
money  can  be  obtained. 

Any  substance  that  custom  or  law  permits  to  be 
used  for  making  money — whether  gold,  silver,  cop- 
per, iron,  tin,  paper,  wheat,  corn,  cattle, — becomes 
the  ruling  commodity,  but  because  the  quantities  of 
it  are  expressed  in  fixed  numbers,  our  mind  does  not 
readily  comprehend  the  fact  that  such  a  substance 
itself  is  sometimes  dear  and  sometimes  cheap.  When 
the  money  price  of  all  commodities  rises,  they  are 
said  to  have  become  dearer,  although  the  fact  usually 
is  that  money  has  become  abundant  and  cheap,  and 
is  the  only  commodity  that  has  fluctuated.  Upon 
the  great  influx  of  gold  from  California,  prices  of 
many  commodities  and  several  descriptions  of 
property    rose    in    several    parts     of    the    United 


60  NATURAL    HISTOET 

States;  and  a  similar  increase  of  prices  took  place  in 
the  years  1862,  '3  and  '4,  in  consequence  of  the 
increase  of  paper  money.  In  both  these  instances 
the  circulating  money  was  a  commodity;  and  al- 
though in  the  first  instance  the  rise  of  prices  was 
primarily  caused  by  the  increase  of  money  made  of 
gold  and  silver,  in  whicli  the  prices  were  expressed, 
and  in  the  second  instance  it  was  caused  by  money 
made  of  paper,* in  which  the  prices  were  expressed, 
the  fact  was  very  plain  that  the  increase  of  the  com- 
modity called  money  produced  in  both  instances  the 
same  effect  (in  kind  but  not  in  degree),  upon  prices 
of  other  commodities;  the  quantity  of  it  in  this 
country,  was  greater  than  the  sum  of  money  required 
to  transact  the  business  of  the  people,  upon  an  exact 
equality  w^itli  the  sum  of  money  in  use  among  the 
nations  having  commercial  relations  with  this 
country.  Our  lawful  money  was  a  commodity  of 
which  we  possessed  a  larger  supply  than  we  required 
to  conduct  our  economical  affairs  upon  a  par  with 
those  of  the  rest  of  the  world;  it  was,  therefore, 
cheaper  (comparatively)  than  some  other  commodi- 
ties, or  it  became  cheaper  at  intervals,  and  the 
merchants  of  other  nations  were  thus  enabled  to 


OFMONEY.  61 

\ 

convey  away  our  real  money  to  those  nations  at  a 
profit,  in  exchange  for  their  commodities  sold  to  us. 
"We  spoke  and  wrote  of  tlie  increased  prices  of  other 
commodities,  not  of  the  decline  in  the  value  of  money; 
but  when  the  quantity  of  paper  money  became 
great,  and  the  premium  on  gold  and  silver,  expressed 
in  this  paper  money,  increased  very  much,  then 
the  fact  that  paper  money  had  become  abundant  and 
cheap,  was  easily  understood  by  reflecting  minds. 
If,  for  example,  the  government  had  passed  a  law 
calling  in  the  paper  money,  declaring  that  after  a 
certain  date  it  would  be  lawful  money  only  in  pay- 
ment of  loans  made  to  or  debts  due  the  government, 
gold  and  silver  coins  to  be  thereafter  restored  as  the 
"legal  tender,"  all  of  the  paper  money,  whether 
issued  by  government  or  by  banks,  circulating  after 
that  date  and  not  redeemed  in  lawful  coined  money, 
would  have  become  a  commodity,  dealt  in  at  its 
market  price  exactly  as  gold  and  silver  coins  had 
been  commodities,  bought  and  sold  at  their  market 
price,  while  paper  money  was  the  ruling  currency ; 
that  is,  the  coined  money  and  the  paper  money 
would  have  exchanged  places  as  commodities.  In 
1857,  when  the  augmented  supplies  of  real  money 


52  NATURAL    HISTOKY. 

from  the  California  mines  had  greatly  increased 
prices,  and  turned  the  foreign  exchanges  against  ns, 
the  banks  of  'New  York,  by  contracting,  turned  all 
the  exchanges  in  favor  of  the  city,  and  although  they 
were  forced  to  suspend,  in  consequence  of  fright  and 
panic  among  the  people,  they  resumed  again  in  a 
few  days,  the  real  money  flowing  to  them  from  all 
quarters,  and  the  export  of  commodities  largely  in- 
creasing from  the  reduction  in  prices  resulting  from 
tlie  contraction  of  the  volume  of  money  in  use. 
Hence  it  is  evident  that  the  increase  or  decrease  of 
any  money  that  circulates  lawfully  or  by  usage 
makes  prices  of  other  commodities  dear  or  clieap, 
exactly  as  the  abundance  or  scarcity  of  wheat  or  of 
any  other  commodity  makes  it  dear  or  cheap,  because 
money  is  the  commodity  which  measures  the  price  of 
every  other,  that  price  being  expressed  in  a  quantity 
of  money. 


\ 


L 1  ii  Jl  A  U  \ 

UNIVERSITY  OP 

CALIFOKXTA. 


CHAPTER  V. 

Second  Attribute    of  Money:     an  Instrument   of  Commerce,  <jb 
Universal  Medium  of  Exchange. 

Instruments,  measures,  weights  and  money,  are 
to  commerce  and  trade  what  roads  are  to  farmers; 
the  quantity  of  land  used  for  public  roads  being 
an  unproductive  capital,  exactly  as  the  quantity 
of  wealth  employed  in  making  money,  weights, 
measures  and  instruments  is  unproductive.  Al- 
though roads  do  not  produce  any  thing,  they  are 
nevertheless  valuable  for  use.  So  with  money;  it 
does  not  itself  produce  any  thing :  but  of  all  instru- 
ments devised  by  man,  it  is  one  of  the  most  useful, 
because  it  measures  the  price  of  every  thing  else, 
and  is  at  the  same  time  the  instrument  by  which 
any  one  commodity  can  be  exchanged  for  every 
other  commodity:  it  is  at  once  the  mover  of  com- 
modities  and   also   the   measure   of  their   value   as 


64:  NATURAL    HISTORY 

comj)ared  with  each  other.  It  is  the  medium  which 
exchanges  every  thing,  attracting  all  things  to  itself, 
and  distributing  them  as  rapidly  as  it  attracts  them : 
it  makes  a  market  for  every  thing,  and  forces  every 
thing  that  is  to  be  bought  and  sold  to  and  from  a 
market ;  through  commerce  it  brings  to  every  man, 
so  far  as  his  means  can  procure  them,  commodities 
from  all  parts  of  the  earth.  By  the  use  of  this 
instrument  the  human  mind  is  able  to  comprehend 
quantities  of  wealth  more  readily  than  if  the  items 
composing  such  quantities  were  stated  separately. 
Before  money  was  the  universal  instrument  of  trade, 
it  was  customary  to  measure  the  property  of  a  man 
by  enumerating  the  various  articles  of  which  his 
wealth  consisted :  the  number  of  horses,  sheep,  oxen, 
goats,  garments,  etc.,  is  mentioned  in  ancient  records 
in  the  catalogue  of  commodities  possessed  by  a  per- 
son, in  order  to  convey  a  knowledge  of  the  extent 
of  his  riches,  but  such  enumerations  are  not  requisite 
to  convey  such  knowledge  to  minds  familiar  with  the 
use  of  money,  the  expression  of  the  sum  of  money 
for  which  a  man's  estate  could  be  sold  —  as  hundreds 
or  thousands  of  dollars,  pounds,  francs  or  reals  — 
being  sufficient  to  convey  that  knowledge,  precisely 


OFMONEY.  56 

as  distance  is  stated  in  miles ;   time  in  hours,  days, 
years,  etc. 

Without  the  use  of  uniform  measures  of  weight, 
capacity  and  length,  it  would  be  difficult,  if  not 
impossible,  to  conduct  the  present  quantity  of  ex- 
changes of  commodities  by  barter;  only  in  cases 
where  the  Creator  has  made  nearly  uniform  quan- 
tities in  nature,  could  the  mind  form  a  correct  esti- 
mate of  such  quantities  without  the  use  of  weights 
and  measures.  Time  is  measured  by  the  motions 
of  the  earth,  and  is  perceptible  to  every  mind  in  the 
alternations  of  day  and  night,  and  the  changes  of  the 
seasons.  Some  animals  grow  nearly  uniform  in  size 
and  weight  in  a  particular  locality.  Fruits  and 
vegetable  productions  follow  the  same  law.  But  in 
that  minute  subdivision  of  commodities  essential  to 
trade,  it  is  only  by  means  of  uniform  weights  and 
measures  that  man  can  determine  exact  quantities, 
and  the  use  of  these  instruments,  of  one  unvarying 
standard,  has  been  found  so  highly  favorable  to 
the  rapid  extehsion  of  commerce  within  particular 
nations,  that  benevolent  scientific  persons  earnestly 
advocate  the  adoption  of  one  uniform  standard  for 
weights  and  measures  by  all  civilized  nations,  in  the 


56  NATURAL    HISTORY 

hope  of  thereby  facilitating  the  extension  of  that 
commerce  which  in  every  age  has  been  a  most 
efficient  means  of  spreading  civilization.  The  making 
of  instruments  for  determining  quantities,  or  the 
regulation  of  them,  is  one  of  the  objects  for  which 
governments  are  instituted,  and  although  very  few 
governments  engage  in  the  manufacture  of  them,  it 
is  made  the  duty  of  government,  in  every  civilized 
nation,  to  see  that  they  are  made  uniform,  and  to 
punish  any  person  who  makes  or  uses  a  false  measure 
or  weight.  So  it  is  with  the  instrument  of  com- 
merce, money :  government  is  always  empowered  to 
determine  the  character  of  the  money  which  shall 
be  used  among  its  people,  so  as  to  preserve  that 
money  from  being  falsified,  and  this  power  is  a  pre- 
rogative of  the  supreme  government  of  every  nation 
enjoying  a  knowledge  of  the  blessings  of  civilized 
life.  The  stamp  of  the  government  upon  an  instru- 
ment for  determining  quantities  or  values,  affords 
presumptive  evidence  of  genuineness,  and  in  affixing 
this  stamp,  or  in  protecting  its  people  from  the  use 
of  false  instruments,  the  government  fulfills  the  trust 
reposed  in  it.  It  is  no  more  requisite  that  a  govern- 
ment should  undertake  to  supply  the  materials  of 


OFMONEY.  *  5T 

whicli  instruments  are  made,  than  that  it  should 
undertake  to  supply  conveyances  for  its  people  to 
ride  to  and  from  market.  Whenever  a  government 
undertakes  to  supply  the  material  for  making  the 
instrument  called  money,  experience  proves  that 
irresistible  temptations  to  abuse  their  power  are 
presented  to  the  persons  in  authority;  as  in  the 
middle  ages,  when  the  coined  money,  becoming  a 
plaything  in  the  hands  of  governments,  was  adulter- 
ated whenever  "reasons  of  state"  made  it  practica- 
ble, the  custom  being  termed,  in  the  language  of 
those  times,  "raising  the  standard,"  meaning  that  the 
standard  value  of  the  gold  or  silver  in  a  piece  of 
money  was  increased  ;  so  that  from  successive  alter- 
ations the  pieces  came  to  possess  in  some  instances 
only  a  fourth  or  fifth  part  of  the  pure  metal  which 
they  had  formerly  contained,  although  the  sum  of 
money  which  they  represented  remained  the  same, 
exactly  as  if  the  dollar,  or  the  pound  sterling,  or  the 
franc  of  our  own  time  were  called  in  by  government 
and  reissued  of  half,  or  a  quarter,  or  a  fifth  its 
present  weight  of  pure  metal. 

The  opinion  that  it  is  the  duty  of  government  to 
provide  the  materials  of  which  money  is  made,  as 
3^ 


68  NATURAL    II ISTOEY 

well  as  to  impress  the  stamp  upon  it,  arises  from  the 
theory  that  money  is  nothing  more  than  an  instru- 
ment, the  stamp  being  ail  that  is  requisite  to  give  it 
value.  It  has  already  been  observed  that  if  this 
theory  were  true,  all  governments,  whether  presided 
over  by  Presidents,  Kings,  Queens  or  Emperors, 
might  be  as  rich  as  they  pleased.  Taxes  would  not 
be  required,  pecuniary  distress  would  be  unknown, 
labor  might  cease,  and  all  mankind  could  devote 
themselves  to  perpetual  amusement.  The  theory  is 
so  ridiculously  absurd,  the  practical  illustrations  of 
its  folly  have  been  so  numerous,  and  the  disasters 
resulting  from  every  attempt  that  has  been  made  to 
carry  it  into  practical  effect  have  been  so  often  repeat- 
ed in  one  nation  after  another,  that  the  whole  com- 
mercial world  stands  appalled  at  the  frightful  specta- 
cle presented  by  any  nation  whose  government 
adopts  the  delusion. 

Whenever  this  theory,  that  money  is  only  an 
instrument  which  receives  its  value  wholly  from  the 
stamp  of  the  government,  seizes  upon  the  governing 
mind  in  any  nation,  the  adulteration  of  the  currency, 
in  one  form  or  another,  becomes  inevitable.  Multi- 
tudes  of   people  sustain  and  advocate  the    theory 


OFMONEY.  69 

without  reflecting  upon  the  consequences  of  the 
violent  fluctuations  that  are  certain  to  be  produced 
in  the  prices  or  values  of  all  property  and  commo- 
dities;  and  the  voice  of  reason  and  humanity  is 
drowned  by  the  admiring  plaudits  of  those  who  think 
they  forsee  vast  riches  to  themselves  or  great  benefits 
to  all  classes  in  the  approaching  abundance  of  money. 
Thomas  Jeff'erson  said  that  "paper  money  makes  a 
lottery  of  all  private  property,"  and  excessive  issues 
of  paper  money  not  redeemable  in  coin,  have  very 
frequently  been  the  medium  resorted  to  in  such  cases, 
or  for  such  purposes,  but  the  adulteration  of  the 
coined  money,  made  to  answer  the  same  purposes, 
before  the  use  of  paper  money  became  general, 
produces  as  much  of  a  lottery  of  private  property,  to 
the  extent  of  the  adulteration,  as  paper  money. 

In  emergencies,  when  a  government  is  forced  to 
expend  more  than  its  income  from  taxes  and  duties, 
there  arises  a  temptation  to  borrow  money  indirectly 
from  the  people  through  the  issue  of  a  paper 
medium.  Such  paper  money,  if  issued  in  excessive 
volume,  without  interest  and  not  fundable  must,  as 
"Washington  has  observed,  be  a  legal  tender  "or 
nothing."    Public  opinion,  without  any  express  law, 


60  NATURAL    HISTORY 

may  make  it  a  compulsory  payment — as  in  tlie  rebel 
states,  and  that  is  the  same  as  making  it  a  tender  by 
law.  Being  made  a  compulsory  or  legal  tender,  it 
takes  the  place  of  the  coined  money,  and  with  the 
increase  or  decrease  of  the  quantity  of  it  in  use,  as 
explained  in  the  chapter  on  money  as  a  commodity, 
the  prices  of  coined  money  and  commodities  rise  or 
fall;  if  only  a  small  quantity  be  used,  as  compared 
with  the  quantity  of  coined  money  in  the  country, 
only  a  small  quantity  of  the  coined  money  will  be 
exported  to  other  countries;  but  if  a  quantity  of  such 
paper  money  be  suddenly  issued,  equal  to  the  sum 
of  all  the  real  money  in  tise  before  the  paper  issue, 
then  the  increas^-ef^  prices  of  commodities  will,  by 
slow  degrees,  tend  upward  toward  double  what  they 
had  been  under  a  currency  regulated  by  real  money — 
these  prices  being  expressed  in  the  legal  tender  paper 
money — until  the  whole  of  the  coined  money  is 
driven  out  of  the  country ;  and  then  if  the  volume  of 
legal  tender  paper  be  maintained  at  this  sum,  prices 
will  gradually  recede  to  what  they  were  before  the 
issue  of  the  legal  tender  paper — i.  e.  to  par  with  the 
prices  that  prevailed  before  the  issue  of  legal  tender 
paper.    That  is  to  say,  if  it  were  possible  to  keep  the 


OFMONEY.  61 

people  satisfied  with  a  paper  money  exclusively,  the 
paper  money  might  be  maintained  at  so  small  a  sum 
that  it  would  be  as  valuable  as  coined  money.  If 
in  any  case,  from  an  unforseen  calamity,  there  arises 
a  necessity  for  the  issue  of  bills  of  credit  in  the  nature 
of  a  circulating  medium,  making  them  with  interest, 
the  rate  of  interest  being  subject  to  increase  or 
decrease  by  public  notice  from  the  treasury  as  the 
state  of  the  money  market  renders  advisable,  the 
periodical  funding  of  the  bills  remaining  discretionary 
with  the  government,  is  supposed  to  have  the  effect 
of  keeping  them  from  ])erforming  the  functions  of 
real  money  to  any  great  extent.  Bearing  interest^ 
they  are  generally  held  as  an  investment,  and  thn» 
their  depreciation,  to  some  extent,  is  prevented.  If 
issued  without  interest  and  not  a  legal  tender,  they 
would  go  to  a  discount  as  compared  with  real  money. 
If  made  a  legal  tender,  the  utmost  vigilance  should 
be  exercised  by  those  in  authority  to  prevent  the 
volume  in  use  from  being  so  excessive  as  to  cause  the 
quantity  of  money  in  the  country  to  exceed  that  re- 
quired to  preserve  the  whole  volume  at  par  with  the 
currencies  of  other  nations,  as  indicated  in  the  state 
of  the  foreign  exchanges;  for  a  lawful  paper  money 


62  NATURAL    HISTOEY. 

may  become  an  inferior  instrument  of  commerce  in 
proportion  as  it  raises  the  foreign  exchanges  above 
par,  thus  becoming  itself  depreciated;  and  in  the 
progress  of  the  depreciation  of  the  lawful  money  all 
the  industry  of  a  nation  is  subject  to  an  indirect  tax, 
amounting  precisely  to  the  sum  of  the  depreciation, 
and  this  sum  is  the  premium  on  the  foreign  ex- 
changes, or  on  real  money,  expressed  in  the  legal 
tender  money. 


^NIYERSITY  < 

^  CAUFORXI A 


CHAPTER   VI. 

The   Third   Attribute    of    Money:      a   Measure    of   Prices;    ob, 
Standard  of  Value. 

There  are  various  applications  of  the  term  value, 
as  value  in  use,  value  in  exchange,  exchangeable 
value,  intrinsic  value,  ideal  value,  practical  value,  and 
standard  of  value.  Money  is  denominated  the  stand- 
ard of  value,  because  it  is  in  quantities  of  money 
that  values  are  generally  expressed,  and  the  ex- 
changeable values  or  prices  of  all  commodities  are 
subject  to  rise  or  fall  with  the  increase  or  decrease  of 
money.  The  term  measure  of  prices  seems  most 
appropriate  to  express  this  measuring  power  of 
money,  in  preference  to  the  term  standard  of  value, 
the  latter  being  sometimes  applied  to  the  "monetary 
standard,"  or  quantity  of  pure  metal  constituting 
the  "monetary  unit,"  that  govei'nment  puts  into  the 
coin    stamped    at     the    mint, —  and    the  only  real 

STANDARD  OF  VALUE   is  labor. 

(63) 


64  NATURAL    HISTORY 

• 

The  quantity  of  money  in  use  determines  the 
prices  of  commodities  and  property,  tliroughont  the 
commercial  world.  It  is  the  measure  of  tliose  prices, 
being  one  of  tliose  commodities  itself,  and  also  the 
instrument  by  which  they  are  sold,  or  exchanged, 
or  paid  for.  The  measure  of  its  own  price  is  ex- 
pressed in  the  rate  of  interest  paid  or  received  for  the 
use  of  it,  in  its  character  of  an  instrument  of  trade 
and  commerce.  There  may  be  said  to  be  a  measure 
of  the  quantity  of  real  money  whicli  it  is  possible  for 
mankind  to  possess,  and  that  is  the  quantity  of  the 
precious  metals  which  the  Creator  has  placed  in  the 
earth  accessible  to  human  labor.  Although  silver 
is  found  in  larger  quantities  than  gold,  the  labor 
required  to  procure  silver  is  more  than  to  procure 
gold,  because  silver  is  usually  deposited  at  greater 
depths,  gold  being  near  the  surftice.  Hence  it  was 
that  silver  was  until  recently  considered  a  more  just 
monetary  standard,  because  the  quantity  of  labor 
expended  in  procuring  it  was  more  uniform  than  the 
quantity  of  labor  expended  in  procuring  gold,  but 
mechanical  ingenuity  has  now  greatly  increased  the 
efficiency  of  manual  labor  in  silver  mines. 

Although  it  has  by  economists  been  denied  that 


OFMONEY.  65 

money  is  a  true  measure  of  the  values  of  all  other 
commodities,  there  can  be  no  doubt  that  it  causes  all 
other  commodities  to  rise  or  fall  in  price  with  the 
increase  or  decrease  of  the  quantity  of  it  in  use. 

It  is  true  that  the  price  of  money — the  rate  of 
interest ,  does  not  apparently  -always  follow  exactly 
the  law  of  supply  and  demand  governing  other 
prices  —  the  rate  of  interest  being  very  low  when  a  \ 
great  glut  of  money  prevails  in  the  market,  but 
rising  rapidly  as  the  increased  supply  of  money  gets 
into  circulation  and  produces  an  increase  of  prices, 
the  demand  for  money  and  the  rate  of  interest  in- 
creasing with  the  supply  of  money. 

As  the  high  price,  or  rate  of  interest,  paid  for  the 
use  of  money  prevails  most  generally  when  great 
profits  are  made  by  the  use  of  money,  these  profits 
being  the  true  measure  of  the  rate  of « interest,  it 
follows  that  the  course  of  the  rate  of  interest  is  also 
a  proof  that  money  is  a  measure  of  prices.  Prices 
of  commodities  being  expressed  in  money,  how  can 
it  be  that  money  is  not  the  measure  of  the  prices  of 
commodities  ?  We  may  say  that  a  day  of  twenty- 
four  hours  is  not  the  true  measure  of  the  diurnal 
revolution  of  the  earth,  that  the  true  measure  of  such 


6^'  NATURAL    HISTOEY 

revolution  is  the  earth's  motion,  and  that  a  day 
of  twentj-fonr  honrs  of  time,  being  made  by  the 
motion, —  the  effect,  not  the  cause, —  lias  notiiing  to 
do  witli  causing  the  motion  :  so  it  may  in  this  sense 
be  said  of  money,  and  it  has  been  said,  that  it  is  not 
a  true  measure  of  the  prices  of  commodities,  because 
the  volume  of  these  in  the  world  so  vastly  exceeds 
the  volume  of  money  that  it  cannot  be  used  in  every 
purchase  or  sale  ;  and  commodities  increase  and 
decrease  in  quantity  and  in  price  from  causes  wholly 
unconnected  with  money,  and  that  the  only  true 
measure  of  value  and  prices  is  the  toil  of  a  human 
beine:.  Admittinoj  all  that  is  claimed  for  abstract 
theories  of  this  nature,  without  acknowledging  it 
possible  for  the  masses  of  mankind  to  understand 
them,  their  promulgation  being  profitable  and  amus- 
ing only  to  those  possessing  exalted  metaphysical 
genius,  no  one  can  deny  that  his  own  observation 
convinces  every  man  that  twenty-four  hours  and  a 
fraction  constitute  what  is  termed  the  measure  of  the 
time  in  which  the  earth  makes  its  diurnal  revolution, 
tliat  quantities  of  money  constitute  the  measure  by 
which  lie  determines  in  commercial  transactions  the 
prices  of  quantities  of  commodities,  that  money  is  a 


OF    MONEY.  67 

commodity,  that  commodities  at  commercial  centers 
rise  and  fall  in  money  price  with  the  increase  and 
decrease  of  the  quantity  of  money,  as  well  as  from 
supply  of  and  demand  for  them,  and  that  the  rate 
of  interest  given  or  received  for  the  use  of  money 
rises  or  falls  with  the  increase  or  decrease  of  the 
profits  made  by  such  use. 

Throughout  the  principal  European  nations,  the 
increase  of  the  quantity  of  money  in  use,  from  the 
production  of  the  mines  discovered  in  America, 
caused  prices  of  many  things  to  increase  four  hun- 
dred per  centum  or  more,  being  at  the  rate  of  five 
dollars  for  what  had  previously  been  sold  for  only 
one  dollar.  This  rise  of  prices  in  Europe  after  the 
discovery  of  America  has  recently  been  attributed 
to  causes  other  than  the  increase  of  money  I  That 
discovery  gave  an  impetus  to  commerce,  industry, 
art,  education,  and  all  other  elements  of  progressive 
civilization,  and  the  development  of  that  civilization, 
not  the  increase  of  money,  it  has  been  contended, 
caused  the  rise  in  prices;  but  Adam  Smith,  who 
wrote  about  one  hundred  years  ago,  has  stated  the 
contrary,  remarking  in  his  work  on  the  *' Wealth  of 
Nations,"  (Book  I,  Chapter  2),  of  the  rise  in  the  price 


68  NATURAL    HISTOEY 

of  corn,  between  1570  and  1640  :  "The  discovery  of 
the  abundant  mines  of  America  seems  to  have  been 
the  sole  cause  of  this  diminution  in  the  vahie  of 
silver,  in  proportion  to  that  of  corn.  It  is  accounted 
for,  accordingly,  in  the  same  manner  by  everybody ; 
and  there  never  has  been  any  dispute,  either  about 
the  fact,  or  about  the  cause  of  it."  Although  this 
positive  statement  of  fact,  is  sufficient  to  convince 
any  person  as  to  the  rise  of  prices  caused  by  the 
increase  of  money  after  the  discovery  of  America,  the 
increase  of  the  money  being  the  cause,  not  the  effect, 
of  the  rise,  it  is  only  requisite  to  know  what  has 
taken  place  at  the  gold  mines  in  California  and 
Australia,  to  be  convinced  of  the  truth  of  the  prin- 
ciple that  an  increase  of  money  causes  a  rise  iu 
prices.  Commodities  of  every  kind,  useful  to  man, 
command  uniformly  higher  prices  at  the  gold  mines 
than  any  where  else ;  these  higher  prices  continuing 
in  the  path  of  the  gold,  as  it  flows  from  the  mines 
into  use  as  money  all  over  the  world,  but  decreasing 
gradually  as  tlie  influences  of  the  increase  of  the 
money  are  reduced.  It  would  be  quite  as  logical  to 
assert  that  the  quantities  of  other  commodities,  then 
in  the  world,  were  the  cause  of  the  accidental  dis- 


OF    MONEY.  69 

coveiy  of  gold  mines  in  California,  as  to  say  that  the 
liigh  prices  of  commodities  at  those  mines  is  the 
cause,  not  the  eifect,  of  the  increase  of  gold.  Pre- 
cisely the  same  hind  (not  degree)  of  increase  of  prices 
arises  from  an  increase  of  paper  money. 

That  the  rise  in  prices  of  commodities,  from  the 
increase  of  money,  took  place  very  slowly  *  after  the 
discovery  of  America,  may  be  accounted  for  by  the 
state  of  civilization  and  commerce  at  that  period. 
Yoyages  and  adventures  are  now  completed  in  as 
many  months  as  they  then  were  in  years ;  it  is  so 
difficult  for  the  present  age  to  understand  the  very 
slow  rate  of  progress  made  in  every  kind  of  enter- 
prise two  or  three  hundred  years  ago,  in  the  com- 
mercial nations,  that  we  consider  it  impossible  for 
the  increased  supplies  of  money,  produced  in  the 
fifteenth  and  sixteenth  centuries,  to  have  been  nearly 
a  century  in  use  before  exerting  an  influence  on 
prices  throughout  the  commercial  world ;  but  the 
slowness  of  the  circulation,  the  efforts  of  nations 
to  keep  the  money  which  they  received,  and   the 

*  The  rise  of  prices  in  this  country,  from  the  increase  of  paper  money,  in 
1862-8,  toolc  place  so  slowly  at  first,  that  many  persons  were  disposed  to  doubt 
those  principles  of  monetary  science  which  had  been  generally  accepted  as 
truths  by  the  commercial  world. 


7G|  N  A  T  U  K  A  L     II  I  S  T  O  K  Y 

practice  of  hoarding  by  individuals,  explain  tlie 
mystery.  The  great  expansion  of  prices  in  the  seven- 
teenth century  was  caused  mainly  by  the  accumula- 
tion of  the  metals  bursting  forth  from  the  restraints 
which  had  been  placed  upon  them,  the  general  intro- 
duction of  the  business  of  banking  by  individuals  or 
corporations  having  afforded  facilities  in  several 
countries  of  Europe  for  giving  them  a  more  rapid 
circulation.  That  the  gold  from  California  and 
Australia  has  not  produced  a  more  marked  effect 
upon  prices  in  our  own  time,  is  accounted  for  by  the 
demands  of  the  commercial  world,  owing  to  the 
augmented  volume  of  commercial  transactions,*  for 
an  increased  amount  of  money :  within  the  sixteen 
years  since  this  discovery  of  gold,  prices  have  not 
advanced  as  rapidly  as  it  had  been  generally  expec' 
ted  they  would,  yet  it  is  evident  that  the  high  prices 
prevailing  in  the  communities  immediately  connected 
with  the  mines  are  gradually  and  irresistibly  extend- 
ing to  other  communities,  and  that  the  labor  of  the 
whole  civilized  world  is  being  gradually  influenced 


*  There  has  also  been  an  immense  absorption  of  the  metals  by  Oriental 
nations,— in  India  and  China,— during  the  two  great  rebellions ;— and  in  Egypt, 
Ac,  very  recently,  in  exchange  for  cotton. 


OF    MONET.  71 

by  these  prices ;  altliongh  in  our  own  case,  because 
the  price  of  food  is  kept  down  by  a  most  extraordi- 
nary application  of  labor  saving  macliinery  to  agri- 
cultural industry,  we  have  not  yet  realized,  even  in 
the  midst  of  a  calamitous  rebellion  that  has  required 
a  million  of  men  to  fly  to  arms,  the  full  effect  of 
the  increased  reward  which  labor  is  reaping  at  our 
gold  mines.  When  we  contemplate  the  stupendous 
events  of  these  years,  with  the  heroic  struggles  of 
nations  to  attain  to  a  higher  and  purer  social  and 
political  life,  how  abundant  is  the  cause  for  gratitude 
to  Ilim  who  has  furnished  the  resources  of  material 
and  intellectual  power  in  such  profusion  to  those 
who,  on  this  continent,  have  sustained  the  rights  of 
man.  As  in  the  evolutions  which  have  elevated 
European  civilization  since  the  discovery  of  America, 
the  money  of  the  American  mines  aided  in  the  good 
work  of  securing  and  maintaining  those  rights,  so 
now,  the  precious  metals,  the  devolopment  of  labor 
saving  machinery  and  other  resources  of  power  and 
wealth,  have  been  bestowed  upon  us,  at  the  moment 
when  most  wanted  to  reassert  the  dignity  of  man, 
and  to  vindicate  the  right  of  the  nation  to  life  and 
liberty  I 


7?.  NATURAL      HISTORY 

I 

Money  being  the  original  or  primary  cause  of  the 
existence  of  the  money  prices  of  commodities,  and 
the  measnre  of  these  prices,  wherever  trade  and 
commerce  are  carried  on  in  civilized  communities, 
it  naturally  follows  that  an  increase  of  it  in  any 
nation  causes  a  rise  of  ]3 rices  in  that  nation.  That  is 
to  say,  an  increase  of  money  is  an  original  or  pri- 
mary cause  of  tlie  rise  of  prices.  But  from  this  rise 
of  prices  there  comes  to  be  a  demand  for  a  greater 
(quantity  of  money,  and  hence  an  expansion  of  the 
volume  of  credits,  as  bills  of  exchange,  book  credits, 
bank  deposits,  drafts,  bank  notes,  checks,  &c.  These 
media  of  exchange  when  performing  the  functions 
of  an  instrument  of  commerce  are  "currency"  in  or 
to  the  extent  of  tlie  ratio  of  their  circulation,  and  the 
increase  of  them  from  a  rise  of  prices  is  sometimes 
cited  as  proof  that  it  is  the  rise  of  prices  which 
increases  the  quantity  of  money.  That  the  increase 
of  prices  of  commodities  causes  an  increase  of  the 
quantity  of  auxiliary  money,  may  be  and  is  un- 
doubtedly true,  but  the  true  primary  cause  of  the 
increase  of  prices  is  obviously  the  increase  of  money. 
There  are  cases  in  which  credits  themselves,  in  com- 
mon with  real  money,  perform  all  the  offices  of 


OF    MONEY.  73 

money,  as  an  instrument,  and  in  such  cases  an 
increase  of  the  credits,  with  increasing  prices,  may 
be  apparent  witliout  any  increase  of  real  money, 
because  the  credits  may  go  on  increasing,  as  well  as 
prices,  long  after  tlie  increase  of  real  money,  which 
originally  produced  the  expansion  of  credits,  has 
terminated,  and  even  while  the  stock  of  real  money 
is  running  low. 

Credits  alone,  to  a  certain  extent,  perform  the 
functions  of  money,  and  increase  of  prices  and 
credits  go  hand  in  hand  until  stopped  by  high 
prices,  which  cause  an  export  of  specie,  or  drain  the 
country  of  its  wealth.  In  such  cases  panic  and 
revulsion  become  inevitable  and  prevail,  sooner  or 
later  until  the  equilibrium  between  the  wliole  volume 
of  money  and  prices  is  restored  to  a  level  with  that 
of  all  nations,  the  foreign  exchanges  returning  to  par, 
or  declining  in  proportion  to  the  reduction  of  the 
volume   of  credit. 

The  whole  volume  of  money  as  a  measure  of  prices 
in  any  country,  where  credit  is  in  a  high  state  of  de- 
velopment, usually  consists  of: 

1.  Coined  money  circulating  in  the  hands  of  the 
people. 
3 


T4  NATURAL      HISTORY 

2.  Circulating  notes  and  credit  media,  in  use  or  in 
the  hands  of  the  people. 

3.  Deposits  in  banks,  or  with  bankers,  payable  on 
.demand,  including  under  this  head  all  the  specie  and 

bullion  held  by  banks  and  bankers. 

The  second  and  third  are  the  same  in  their  effect 
on  prices  as  real  money,  to  the  extent  of  their  use, 
or  in  the  ratio  of  their  circulation. 

"Where  there  are  circulating  bank  notes,  and  a 
government  paper  made  a  compulsory  payment  by 
law  or  usage,  the  money  measure  of  prices  consists  of: 

1.  Legal  tender  paper  money. 

2.  Circulating  notes  of  banks,  and  all  other  credit 
media  of  exchange. 

3.  Deposits  in  bank,  payable  on  demand,  includ- 
ing coin  in  bank  at  its  premium  price  in  paper. 

4.  Coined  money  in  the  hands  of  the  people  at  ita 
price  in  legal  tender  paper. 

In  this  case  the  second,  third  and  fourth,  are 
measures  of  prices  in  the  ratio  of  their  circulation. 

In  countries  where  (specie  payments  being  sus- 
pended) paper  money  circulates  by  common  consent 
and  usage,  with  or  without  authority  of  law,  it  is  the 
same  as  legal  tender  money. 


OF    MONEY.  W 

111  times  of  suspension  of  specie  payments  in  any 
country,  the  coined  money  is  not  demonetized :  on 
the  contrary,  the  amount  of  the  premium  on  it,  cor- 
responding with  the  discount  on  paper,  is  added  to 
the  whole  volume  of  the  money  in  use,  because  the 
coined  money  will  pass  for  this  premium,  in  addition 
to  the  sum  that  it  passed  for  before  the  suspension, 
although  at  such  times  the  circulation  of  coined 
money  may  be  very  much  slower  than  when  specie 
payments  prevail — i.  e.  the  ratio  of  its  circulation 
may  be  diminished,  as  compared  with  the  ratio  of 
circulation  of  the  paper  money  which  takes  its  place 
as  current  money  in  general  use. 

The  sum  total  of  all  the  property  in  any  country, 
when  stated  in  money  prices,  gives  a  certain  well 
defined  proportion  to  the  quantity  of  money  in  use; 
and  the  fluctuations  which  are  always  taking  place 
in  the  quantity  of  the  money  in  any  coimtry  produce 
corresponding  fluctuations  in  the  prices  of  property 
in  that  country. 

A  certain  interval  of  time,*  elapses  between  the 


*  This  was  seen  at  the  time  of  the  expansion  of  paper  money  in  this  country  in 
1862  and  1868.  Many  persons  believed  that  the  prices  of  property  would  not 
rise  above  two  or  three  per  cent. 


f6  NATURAL    HISTOEY 

increase  or  decrease  of  the  quantity  of  money  in  nse 
and  the  rise  or  fall  of  prices  of  property  which  it 
causes.  Tlie  length  of  this  time  depends  upon  the 
activity  of  trade,  the  state  of  "public  confidence," 
and  the  length  of  the  credits  granted  or  received  in 
business  circles.  Public  securities,  stocks  and  funds 
are  first  afiected  by  the  increase  of  money,  then 
commodities,  fixed  property  next,  and  labor  last  of 
all.  In  the  case  of  commodities  tlie  complete  eflfects 
of  an  increase  of  money  cannot  be  experienced  until 
the  transfer  from  the  wholesale  dealer  to  the  con- 
sumer is  accomplished,  and  debts  contracted  by  all 
the  dealers  in  the  transfer  have  been  liquidated.  In 
the  United  States  an  expansion  has  usually  completed 
its  circle  of  inflation  in  from  ten  to  thirteen  months, 
at  the  expiration  of  w^hicli  time,  fixed  property  began 
to  be  influenced,  and  labor  to  call  for  higher  wages. 
The  contraction  of  the  volume  of  money  is  much 
more  rapid  in  its  effects  than  the  expansion,  being 
hastened  by  panic ;  although  when  government  inter- 
feres to  legalize  a  suspension  of  specie  payments  the 
high  prices  may  be  made  to  continue  as  long  as  the 
suspension,  or  until,  in  the  case  of  a  young  and 
growing  country,  the  increase  of  property  and  popu- 


OFMONET.  77 

lation  restores  the  volume  of  money  and  prices  to  an 
equilibrium  with  those  of  other  nations.  In  the  case 
of  the  great  revulsion  in  the  United  States  in  1837, 
the  suspension  of  the  banks  being  generally  legalized 
by  the  states,  the  expansion  of  prices  was  prolonged 
in  parts  of  the  country  some  years ;  and  when  all  the 
banks  had  resumed  in  all  parts  of  the  country,  in 
1843,  the  contraction  being  then  at  its  lowest  point, 
another  inflation  w^as  immediately  entered  upon, 
making  very  slow  progress,  however,  for  the  ^ve  or 
six  years  next  ensuing.  The  total  bankruptcy  of 
estates  from  the  revulsion  of  1837,  was  estimated  at 
six  hundred  millions;  but  the  reduction  in  prices  of 
property  of  all  kinds,  between  the  years  1837  and 
1842,  being  the  years  of  maximum  and  minimum 
prices  could  not  have  been  less  than  two  thousand 
millions,  the  circulation  and  deposits  of  the  banks 
having  fallen  from  $276,583,075,  in  1837,  to 
$114,732,236  in  1843.  In  1837  the  nation  by  its 
excessive  paper  money,  wrote  itself  down  as  worth 
about  eight  thousand  millions,  but  in  1843,  the  price 
of  the  whole  property  was  less  than  six  thousand 
millions.  To  illustrate  the  attribute  of  money  as  a 
measure  cf  prices,  it  may  be  supposed  that   three 


78  NATURAL    HISTORY 

nations  (A.  B.  and  C.)  have  population,  wealth  and 
money,  their  monetary  systems  being  at  par  with 
each  other  and  the  rest  of  the  world,  in  the  followino* 
proportions,  in  millions; 

A.  B.  C. 

Population 20  30  40 

Property $12,000  $24,000  $16,000 

Coined  money  in  hands  of  the  people 

and  in  bank 150  270  180 

Circulating  notes  and  bank  deposits 

excluding  tlie  coin  in  banks 350  630  420 

Total  money  in  use 500  900  600 

Reducing  the  sums  to  minima,  we  have: 

A.        B.        c. 

Money  in  use  to  each  person $25  $30  $15 

Property  to  each  person 600  800        400 

Property  to  each  dollar  of  money 24  26^        26|- 

Real  money  per  centum  of  all  the  money.   30  30  80 

A  densely  populated  commercial  and  manufactur- 
ing country  requires  less  money  in  proportion  to  the 
wealth  of  the  people,  but  more  in  proportion  to  the 
number  of  the  people,  than  an  agricultural  country. 
In  proportion  to  the  money  prices  of  all  property  the 
quantity  of  money  in  use  in  every  civilized  nation  is 


OFMONEY.  T9 

found  to  be  so  uniform  as  to  induce  the  opinion  that  a 
natui'al  law  prevails  to  determine  the  relationships  of 
money  to  prices.  In  the  case  of  the  United  States 
and  Great  Britain  and  France  there  seems  to  be  some 
ground  for  believing  that  such  a  law  exists. 

But  in  estimating  the  quantity  of  money  in  any 
nation,  it  is  important  to  include  those  auxiliaries  of 
money  which,  entering  into  the  grand  volume  of  the 
circulating  medium,  perform  the  functions  of  money 
as  instruments  of  trade  and  commerce  and  banking. 
Demand  deposits  are  often  excluded  from  estimates 
of  the  quantity  of  money  in  use,  because  their  name 
indicates  a  state  of  rest,  in  the  nature  of  a  hoard;  on 
the  contrary,  they  are  not  money  at  rest,  because  a 
sum  equal  to  the  whole  amount  of  them  is  sometimes 
exchanged  every  three  or  four  days  at  the  Bank 
Clearing  House,  in  a  great  city,  at  the  present  day. 
A  person  generally  holds  circulating  notes  more  than 
three  or  four  days  before  paying  them  out,  and  if  it 
may  be  assumed  that  the  actual  rapidity  of  circula- 
tion of  deposits  in  bank  payable  on  demand,  through 
the  use  of  checks,  and  drafts,  is  equal  to  that  of  bills 
of  circulation,  then  we  may  conclude  that  the 
efficiency  of  such  deposits,  as  part  of  the  money  in 


80  NATURAL    HISTORY 

use,  is  nearly  equal  to  that  of  any  other  kind  of 
money.  Deposits  payable  on  demand  may,  there- 
fore, have  a  ratio  of  circulation,  or  perform  the 
functions  of  a  measure  of  prices,  equal  to,  and  in  the 
same  manner  that,  the  same  amount  of  real  money 
would  have  or  perform.  And  every  other  credit 
medium  of  exchange,  or  auxiliary  money,  is  a 
measure  of  prices,  equal  to  real  money,  to  the  extent 
to  which  it  is  used,  or  in  the  ratio  of  its  circulation 
as  compared  with  the  ratio  of  circulation  of  real 
money.  It  was  formerly  understood  among  econo- 
mists that  the  only  kind  of  money  which  influenced 
prices  was  the  real  money  circulating  in  the  hands 
of  the  people,  but  the  general  application  and 
extension  of  the  banking  system  is  gradually  dispen- 
sing with  the  use  of  real  money  in  the  hands  of  the 
people  of  civilized  and  enlightened  nations,  and  the 
only  method  by  which  such  nations  can  now  secure 
to  themselves  a  sufficient  stock  of  real  money  to 
preserve  their  financial  systems  from  periodical 
collapse,  is  by  requiring  the  public  institutions  of  a 
monetary  character,  as  banks  and  public  or  govern- 
ment treasuries,  to  hold  reserves  of  real  mone}^ 
When  from  any  cause  the  coined  money  passes  in 


OFMONEY.  81 

large  sums  from  one  nation  to  another,  neither  of 
them  being  producers  of  precious    metal,  the   one 
receiving  and  retaining  it  for  a  sufficient  length  of 
time,  has  the  prices  of  its  commodities  increased,  and 
this  increase  attracts  to  that  nation  more  commodities 
from  all  other  nations  to  be  exchanged  for  the  excess 
of  coined  money,  until  through  the  laws  of  trade  tliat 
excess  is  withdrawn.     For  example,  if  the  nation  A, 
in    the    illustration    on  a  preceding    page,    should 
suddenly  expand  its  paper  money  in  use  above  the 
average  of  other  nations,  prices  of  commodities  and 
property  would  rise;    B  and  C  would  send  to  A, 
every  thing  they  could  spare  to  be  sold  and  exchanged 
for  mone}^,  but  A's  paper  money  being  of  no  use  to 
them,   they   would   convey   away   only   the    coined 
money,  until  the  stock  of  their  coined  money  ex- 
ceeded the  average  of  other  nations,  when  they  would 
find  their  own  prices  increased,  and  their  surplus  of 
gold  and  silver  coin  drawn  away  from  them,  exactly 
as  they  had  drawn  away  A's.     Hence  the  facility 
wdth  which  a  surplus  of  re^l  money  in  any  country 
is  drawn  to  others  and  distributed  throughout  the 
world.     When  the   quantity  of  paper  money   in  a 
nation  is  made  to  exceed  the  average  of  other  nations 
4* 


8S  NATURAL    HIS  TORT 

by  the  legalizing  of  a  suspension  of  specie  payments 
by  the  banks,  or  by  what  is  tbe  same  in  principle,  tlie 
issne  of  government  paper  money,  then  the  paper 
prices  of  all  commodities  in  that  nation  are  increased 
in  the  same  way  that  real  money  prices  would  have 
been  had  the  increase  of  the  circulating  medium 
taken  place  by  means  of  an  increase  of  real  money 
only;  but  with  this  difference,  the  increase  of  real 
money  could  not  have  remained  long  in  the  country, 
as  before  explained :  it  is  undoubtedly  possible  for 
the  increase  of  the  paper  to  be  maintained  at  an 
established  maximum  for  many  years,  with  corres- 
pondingly high  paper  prices  of  commodities  and 
property,  the  real  money  of  the  country  going  away 
to  other  countries,  in  the  interval,  as  rapidly  as  the 
activity  of  trade  and  commerce  and  the  increase  of 
the  paper  ci-eate  a  demand  for  its  export.  Any  kind 
of  money  that  is  made  of  cheap  materials,  if  sanc- 
tioned by  law  or  custom,  invariably  supplants  that 
which  is  made  of  more  costly  materials. 

Although  it  is  possible  for  the  increase  of  a  lawful 
paper  money  to  be  maintained  for  years  at  an  estab- 
lished maximum,  with  correspondingly  high  prices 
of  property  and   commodities,  very  seldom  indeed 


OFMONEY.  83 

has  a  government  that  sanctioned  the  issue  of  such 
paper  been  able  to  achieve  such  a  main  tain  ance  of 
uniformity  in  the  quantity  of  the  j)aper  issues. 
Buenos  Ayres  is  remarkable  for  having  accomplished 
this  great  feat  in  financial  economy.  It  is  usual 
when  a  government  permits  excessive  paper  money 
issues,  to  find  distrust  increase  with  the  increase  of 
the  issues;  the  anxiety  of  people  to  get  rid  of  money 
which  is  day  by  day  growing  less  and  less  valuable, 
causes  a  wild  activity  of  trade  in  every  thing  of 
intrinsic  worth  that  can  be  bought  or  sold  for  it;  and 
if  holders  of  valuable  property  refrain  from  bringing 
it  to  market  at  such  times,  the  most  speculative 
descriptions  of  property  are  seized  upon  at  the  very 
highest  prices  by  the  holders  of  the  sinking  money, 
in  exchange  for  it;  vice  and  immorality,  more  es- 
pecially gambling,  grow  rapidly  among  the  unfortu- 
nate people  who  become  the  victims  of  a  false 
measure  of  prices;  unlucky  speculators,  shorn  of 
their  wealth,  become  desperate;  and  as  society  verges 
toward  the  savage  state,  panic  and  fright  seize  upon 
all  the  people.  These  phenomena  have  lately  been 
prevalent  in  the  capital  of  the  rebellious  states. 
Fright  and  panic  are  not  peculiar  to   government 


§i:  NATURAL    HISTORY 

paper  money  issues:  tliey  prevail  in  cases  of  excessive 
issues  of  bank  paper,  convertible  into  coin,  and  even 
in  countries  having  banking  systems  based  on  real 
money  exclusively.  Remarkable  panics  have  oc- 
curred since  paper  money  came  into  general  use; 
in  the  case  of  John  Law''8  paper  money  in  France,  in 
the  early  part  of  the  eighteenth  century;  in  the 
United  States,  during  the  revolutionary  war,  in  the 
case  of  the  continental  money ;  and  again  in  1812, 
1819,  1832,  1837,  1839,  1857,  and  1860,  the  latter 
being  suddenly  arrested  at  New  York  by  the  banks 
making  their  specie  a  common  fund  and  expanding 
their  credits,  the  first  occurrence  of  a  union  of  that 
kind  known  in  financial  history;  in  England  there 
were  panics  in  1696, 1720, 1746, 1793,  1797, 1814-16, 
1825,  1836,  1847,  1857  and  1864.  ^Russia,  as  well  as 
portions  of  Germany,  have  encountered  great  fluctua- 
tions in  prices  from  excessive  issues  of  paper  money. 
If  it  were  possible  for  one  of  the  nations,  (A)  in  the 
example  already  cited,  to  have  its  whole  volume  of 
coined  money  withdrawn,  the- currency  increased  to 
eight  hundred  millions,  exclusively  in  paper,  the 
relative  condition  of  the  three  nations  may  be 
supposed,  for  illustration,  to  be  changed  thus,  the 


OF    MONEY.  85 

volume  of  the  currency  and  prices  of  each  being  at 

par  with  all  the  world : 

A.  B.  C. 

Population 20  30  40 

Property $20,000  $32,880  $20,420 

Coined  money  in  use none  370  230 

Credit  money  in  use 800  863  536 

Total  money  in  use , 800  1,233  766 

Money  in  use  to  each  person 40  41            19 

Property  to  each  person 1,000  1,096  510 

Property  to  each  dollar  of  money. . ..          25  26|-        26J: 
Real  money,  per  centum  of  all  the 

money none  30          30 

Two  thirds  of  the  coined  money  from  A  is  assumed 
to  have  gone  to  B,  and  one-third  to  C.  This  ideal 
view  illustrates  the  theory  of  Adam  Smith,  that  the 
quantity  of  paper  money  which  a  nation  may  use  is 
that  quantity  of  real  money  which  would  circulate 
if  the  currency  were  wholly  metallic  and  there  were 
no  paper;  in  other  words,  paper  money  may  be  the 
exclusive  currency  so  long  as  all  the  exchanges, 
domestic  and  foreign,  are  at  par.  Could  humanity 
attain  to  this  transcendant  degree  of  self-denial  in 
the  nation  A,  dispensing  wholly  with  the  precious 
metals,  then  the  currency  of  A,  if  regulated  by  the 


Bfi  NATUKAL    HISTORY 

rate  of  the  exclianges,  would  be  exactly  as  uniform 
as  if  it  were  wholly  metalic.  Unfortunately,  how- 
ever, all  past  experience  proves  that  long  before  this 
expanded  state  of  the  currency  could  be  reached, 
panic  would  seize  the  minds  of  the  people  in  A, 
revulsions  would  set  in,  and  the  paper  money  col- 
lapse ;  then  the  precious  metals  would  flow  back 
again  to  A,  restoring  the  equilibrium  between 
money  and  prices  as  before.  In  this  case  heavy 
losses  would  fall  upon  the  people  of  all  three  of  the 
nations  from  the  reduction  of  prices,  and  from  bank- 
ruptcies, incident  to  the  fluctuations  originally  set 
in  motion  by  the  inflation  of  the  paper  money  of  A. 
Were  the  illustration  carried  out  fully  in  practice, 
the  losses  of  the  three  nations  would  be : 

A.  B.  C. 

Property  in  millions. 8,000      8,880      4,420 

Property  to  each  person 400         296  110 

In  addition  to  this  loss  of  prices^  the  people  of  A 
would  be  compelled  to  send  away  their  productions 
in  exchange  for  the  supplies  of  the  precious  metals 
required  to  restore  their  currency  to  a  specie  stand- 
ard.   Hence  it  is  that  every  civilized  nation  endea- 


OFMONEY.  87 

vors  to  keep  a  supply  or  reserve  of  real  money  with 
wliicli  to  maintain  uniformity  in  its  foreign  ex- 
changes. Severe  denunciations  have  been  hurled  at 
systems  of  banking  governed  by  the  principle  of 
keeping  in  hand  a  supply  of  real  money  proportioned 
to  the  liabilities  of  a  bank,  but  those  who  have  in- 
dulged in  them  do  not  seem  to  have  paid  much 
attention  to  the  overwhelming  control  which  the 
foreign  exchanges  exert  upon  the  financial  economy 
of  every  nation.  If  this  reserve  be  proportioned  to 
the  liabilities  of  a  controlling  bank  or  banks,  when- 
ever a  rise  or  fall  occurs  in  the  reserve,  the  bankers 
endeavor  to  restore  the  equilibrium  more  or  less 
gradually  as  the  state  of  the  exchanges  may  dictate, 
and  in  this  way  the  currency  is  kept  at  par  with  that 
of  other  countries,  and  commercial  and  financial 
affairs  preserved  frorfi  excessive  fluctuations. 

The  volume  of  the  measure  of  prices  in  all  civilized 
nations  may  be  expanded  simultaneously,  or  nearly 
so,  without  excessive  fluctuations  of  a  reactionary 
nature  being  experienced  in  any  one  nation,  exactly 
as  the  banks  of  one  city  may  all  expand  their  issues 
together,  which  they  cannot  do  singly  without  great 
embarrassment.    There  has  been  going  on  for  nearly 


88 


NATURAL    HISTORY 


a  century  past,  a  great  expansion  of  the  measure  of 
prices,  both  from  the  increase  of  the  precious  metals 
and  the  extension  of  the  credit  system,  among  all  the 
civilized  nations.     Contraction  of  the  banks  of  a  city 
as  well  as  of  those  of  a  nation,  necessarily  produces 
cancelments  of  debt,  and  to  a  greater  or  less  extent, 
of  prices.     A  contraction  simultaneously  carried  on 
by  banks  in  a  city  as  well  as  banks  in  a  nation,  may 
be  so  gradual  as  to  enable  parties   in   business   to 
exchange  property  and  commodities  for  actual  use 
and  consumption,  and  thus  to  cancel  prices,  or  liquid- 
ate debts,  and  dispense  with  part  of  the  volume  of 
tlie  measure  of  prices,  without  producing  any  serious 
amount  of  bankruptcy;    and,  in  a  certain  sense,  it 
may  be  said  that  there  w^ould  be  a  possibility  of 
avoiding  the  production  of  bankruptcy  in  such  a  case, 
if  credits  were  every  where  only,  what  they  ought  to 
be,  the  representatives  of  property  or  goods  actually 
moving   to   a  market,   or   of    labor    in    productive 
activity. 

The  production  of  bankruptcy  is  not  an  absolute 
and  inevitable  consequence  of  a  contraction  of  the 
volume  of  the  measui-e  of  price,  although,  unfort- 
unately, it  is,  in  practice,  almost  always.     If  at  any 


OFMONEY.  89 

stage  of  its  progress  tlie  expansion  of  a  credit 
measure  of  prices  could  be  permanently  arrested, 
without  exciting  popular  tumult,  as  in  the  case  of 
Buenos  Ayres,  thereafter  the  whole  volume,  no 
matter  how  large  it  might  he,  would  move  with 
uniformity  very  nearly  the  same  as  if  the  currency 
were  metallic.  A  paper  money  gradually  reduced,  by 
a  yearly  per  centage,  might  be  made  even  less 
burthensome  to  the  people  than  an  equal  amount  of 
national  debt ;  for  it  might  be  without  interest,  and 
if  the  nation  were  industrious  and  energetic — all 
nations  are  always  young,  and  vigorous  and  strong, 
while  they  cherish  the  principles  of  religion,  the 
virtues  of  private  life,  and  an  ardent  love  of  country — 
it  could  be  reduced  gradually  from  the  profits  realized 
by  the  savings  from  labor,  by  taxation,  to  an  equality 
with  a  currency  composed  exclusively  of  the  precious 
metals,  without  heavy  losses,  without  much  bank- 
ruptcy, without  very  serious  revulsions.  That  is  to 
say,  such  an  achievement  is  possible,  not  probable 
under  any  government.  It  is  usually  done  with 
heavy  losses,  with  great  bankruptcies,  with  terrible 
revulsions. 

One  of  the  most  convincing  proofs,  that  money  is 


90  NATURAL    HISTOET 

a  measure  of  prices,  is  found  in  the  fact  that  when- 
ever a  paper  money,  sanctioned  by  law  or  custom 
suddenly  increases  the  sum  of  all  the  money  required 
in  any  countiy  to  maintain  the  exchanges  at  par,  real 
money  at  once  commands  a  premium  corresponding 
exactly  with  and  following  the  rate  of  premium  on 
the  foreign  exchanges,  so  that  whatever  may  be  the 
extent  of  the  increase  of  paper  money,  the  premium 
on  the  gold  being  taken  off  the  volume  of  the  paper 
at  a  corresponding  discount,  leaves  the  value  of  the 
paper  money,  expressed  in  real  money,  at  the  normal 
sum.  For  example,  if  a  nation  has  five  hundred 
millions  of  money  in  use  [as  the  nation  A,  in  the 
first  illustration],  the  exchanges  being  at  par  with  all 
the  world,  the  increase  of  irredeemable  paper  money 
will  cause  a  corresponding  premium  on  gold  until  all 
corresponding  nations  increase  their  money  in  an 
equal  ratio,  viz : 


Premium 

Discount 

Normal 

Increased 

on  gold 

Total  prem. 

on  the 

Total 

■  Value 

Volume 

per  cent. 

on  gold 

paper,  p.  c 

,  discount 

Paper      Gold 

600 

800 

60 

300 

sn 

300 

lyVforl 

500 

1,000 

100 

500 

50 

500 

2       "1 

600 

2,000 

300 

1,500 

75 

1,500 

4       «   1 

500 

8,000 

1,500 

7,500 

93fjV 

7,500 

16       "   1 

OF    MONEY.  91 

The  premium  on  gold  corresponds  with  the  sum  of 
paper  money  added  to  the  normal  volume  of  the  whole 
currency;  and  the  discount  on  the  paper  currency  is 
the  same  in  amount,  one  being  equivalent  to  the 
other,  and  either  of  them  taken  from  the  increased 
volume  leaves  the  sum  of  the  normal  volume.  Thus 
the  value  of  the  whole  of  the  currency,  expressed  in 
real  money,  always  remains  at  exactly  the  normal 
sum,  there  being,  in  real  money  values,  no  more  than 
there  was  before,  no  matter  how  great  the  paper 
issues  may  become.  History  proves  the  accuracy  of 
this  law,  in  every  case.  President  John  Adams 
explained  this  law  by  comparing  the  normal  quantity 
of  money  to  the  milk  in  a  vessel;  the  addition  of 
water  (paper  money)  could  make  no  increase  of  milk, 
however  much  might  be  added. 

The  increase,  whether  it  be  by  means  of  paper  or 
real  money,  of  the  measure  of  prices  in  any  nation 
above  the  normal  sum  required  by  the  volume  of  that 
measure  in  the  other  nations,  makes  the  markets  of 
that  nation  the  best  of  all  tlie  world  to  sell  in,  and 
the  worst  of  all  the  world  to  buy  in.  All  other 
nations  sell  their  commodities  there,  taking  pay  in 
its  gold  if  they  cannot  procure  any  thing  else,  until 


92  NATURAL    HISTORY. 

from  exlianstion  its  financial  system  experiences  a 
collapse,  and  the  normal  state  of  its  currency  is 
restored  throngli  violent  convulsions.  "Wise  states- 
men endeavor  to  prevent  such  calamities,  by  a  timely 
exercise  of  forethought,  and  the  application  of  skillful 
measures.  Happy  is  that  nation  which  has  statesmen 
equal  to  such  emergencies. 


CHAPTER  YJl. 

FouETH  Attribute  of  Money  :  an  Equivalent,  or  Recompense. 

Money  is  the  equivalent,  or  recompense  of  labor, 
and  labor  is  itself  the  only  true  measure  of  value,  be- 
cause it  is  the  universal  agent  in  creating  and 
collecting  wealth.  The  labor  of  a  human  being  calls 
forth  a  uniform  quantity  of  exertion  of  body  or  of 
mind,  requiring  the  constant  support  of  food,  raiment 
and  shelter,  and  facilities  for  rest  and  repose.  The  re- 
compense of  labor  should  ther.efore  be  as  nearly 
uniform  as  human  ingenuity  can  make  it.  There  is 
required  for  tliis  recompense,  wherever  justice  prevails 
among  men,  a  substance  which  shall  be  to  the  laborer 
a  full  equivalent,  invariable  in  its  exchangeable  value 
as  his  own  labor.  This  substance  is  found  in  that  kind 
of  money  which  is  uniformly  valuable  at  all  times,  in 
all  places,  under  all  circumstances.    Hence  the  prefer- 

(93) 


^4  NATURAL    HISTORY 

ence  sliown  in  every  age  for  money  composed  of  the 
precious  metals,  because  this  kind  of  money  bears 
intrinsic  worth,  as  a  commodity,  having  been  pro- 
cured by  an  expenditure  of  hibor  worth  the  price 
stamped  upon  it  by  government,  and  being  transfer- 
able at  that  worth  for  use  in  the  arts.  The  stamp  of 
government  only  designates  the  piece,  the  country, 
the  date,  &c.  :  destroy  the  stamp,  the  intrinsic  worth 
remains  unharmed.  It  does  not  rust,  nor  decay. 
Fire  cannot  destroy  it,  nor  water  wash  it  out  It  may 
be  cut  into  small  pieces,  bruised,  broken,  pressed, 
melted,  pounded  into  power  or  dissolved  in  liquids; 
yet  it  can  be  restored  after  passing  through  all  these 
transformations,  more  nearly  to  its  original  worth 
than  any  other  substance  which  man  has  been  able 
to  procure  in  sufficient  quantity  for  purposes  of 
money.  It  is  valuable  because  of  its  use  by  all 
nations  for  purposes  of  ornament.  There  is  always  a 
demand  for  it,  all  over  the  world,  which  secures  its 
permanent  value  in  exchange.  It  possesses  intrinsic 
worth,  because  it  cannot  be  consumed  by  the 
elements,  and  because  of  the  labor  employed  in 
getting  it  from  the  mine.  It  possesses  exchangeable 
value  because  all  mankind  prize  it  for  tlie  beautiful 


OF    MONEY.  95 

Appearance  it  presents  when  fasliioned  into  articles  of 
utility  and  ornament  by  artistic  skill.  It  is  more 
valuable  for  purposes  of  money  than  more  bulky 
articles,  because  large  sums  of  wealth  in  it  can  be 
conveyed  great  distances  in  very  small  space,  without 
much  expense,  passing  through  nations,  over  mount- 
ains, seas  and  oceans,  and  always  retaining  those 
characteristics  of  money  which  procure  the  services 
of  our  fellow  men  and  the  conveniences  and  comforts 
of  life.  ]3y  all  these  excellencies  money  composed  of 
the  precious  metals  commands  for  itself  the  preemi- 
nent distinction  of  being  the  most  invai'iable  equiva- 
lent or  recompense  for  that  which  is  the  only 
irivariable  standard  of  value  known  to  man,  his  own 
labor. 

Real  money  alone  possesses  the  universal  charac- 
teristic of  an  equivalent  for  labor.  Paper  money  is 
too  easily  destroyed,  too  limited  in  its  circulation 
among  the  nations,  and  too  easily  made  of  one  of 
the  most  worthless  of  commodities,  rags,  to  be 
entitled  to  rank  as  an  nniversal  equivalent  for  that 
which  is  the  most  invariable  standard  of  value. 
Paper  money  may  be  made  to  represent  real  money, 
but  when  it  does  so  falsely,  it  is,  in  the  language 


96  NATURAL    HISTORY 

of  Washington,   "the  shadow   in   lieu   of  the  sub- 
stance." 

The  collecting  of  rags  and  making  them  into  paper, 
and  the  printing,  engraving  and  signing  of  notes 
involve  so  small  an  expenditure  of  labor,  that  every 
government  in  the  world  might  make  and  issue  any 
quantity  of  money,  were  it  possible  to  make  paper 
money  the  universal  equivalent  or  recompense.  The 
want  of  that  intrinsic  value  which  is  peculiar  to  real 
money,  prevents  every  description  of  paper  money, 
not  exchangeable  for  real  money  or  its  equivalent, 
from  being  used  as  the  universal  recompense  for 
labor.  Paper  media  do  undoubtedly  perform  the 
functions  of  money,  but  in  the  absence  of  the  power 
of  procuring  for  themselves  real  money,  or  its 
equivalent,  they  cease  to  be  an  universal  equivalent 
or  recompense  for  labor,  because  their  purchasing 
'  power,  which  depends  on  their  quantity,  is  under  the 
control  of  some  other  power  than  that  of  labor,  the 
only  true  standard  of  value;  for  if  the  quantity  of 
frC//  the  issues  of  such  paper  media  are  controlled  by  the 
will  of  governments  and  individuals,  then  the  stand- 
ard of  value,  instead  of  being  regulated,  as  in  real 
money,  by  quantities  of  his  own  labor,  which  is  the 


OFMONEY.  97 

most  uniform  measure  of  value  known  to  man,  be- 
comes subject  to  the  most  uncertain  of  all  things,  the 
will  of  individuals  and  governments.  By  the  use  of 
a  paper  circulating  medium,  not  convertible  into 
real  money,  nearly  all  the  real  money  a  country 
possesses  may  be  driven  out  of  that  country,  and 
sooner  or  later,  if  the  issues  of  the  paper  be  not 
arrested  and  kept  at  a  fixed  sum,  the  money  of 
intrinsic  worth  thus  driven  away,  or  an  equal  amount 
of  it,  must  be  brought  back  again  in  exchange  for  an 
equal  amount  of  commodities  or  property,  at  the 
expense  of  the  labor  of  the  people  of  that  country. 

So  long  as  a  piece  of  paper  termed  a  dollar  will 
procure  commodities  and  property  to  the  same  extent 
that  a  dollar  of  coined  money  would  procure  them, 
it  is  a  true  representative  of  the  equivalent  of  labor; 
but  it  is  so  only  when  it  is  immediately  convertible 
into  a  dollar  of  coined  money,  or  what  is  the  same 
thing,  when  the  dollar  of  coined  money  will  not  sell 
for  any  thing  more  than  the  dollar  of  paper  money, 
and  this  is  the  meaning  of  the  currency  within  a 
nation  b'jing  at  par  with  the  currencies  of  other 
nations,  because  at  such  a  time  there  is  no  premium 
on  gold  and  no  premium  on  the  foreign  exchanges. 
/  5 


9%  NATIJEAL    HISTORY 

As  to  the  foreign  exchanges,  however,  it  should 
always  be  borne  in  mind  that  there  may  be  false 
rates  quoted  in  mercantile  transactions,  as  in  the  case 
of  exchange  between  New  York  and  London.  That 
devotion  to  immemorial  usage  which  causes  the 
customs  of  a  people  to  be  adhered  to  throughout  all 
their  generations,  has  led  to  the  continued  valuation 
of  the  English  pound  sterling  in  the  United  States  at 
four  dollars  and  forty-four  cents,  which  was  establish- 
ed while  the  country  was  subject  to  the  government 
of  England ;  and  the  exchange  is  rated  at  par  only 
when  that  ($4:yVo)  is  the  price  of  the  English  sovereign 
in  the  United  States  gold  currency  of  the  pre- 
sent time.  But  this  can  hardly  ever  happen, 
except  when  specie  payments  are  suspended  in 
England  and  paper  money  is  a  legal  tender  in  that 
country,  because  the  intrinsic  value  of  the  coined 
money  of  the  United  States,  as  compared  with  the 
intrinsic  value  of  the  coined  money  of  the  United 
Kingdom,  makes  the  pound  sterling  (or  sovereign) 
worth  about  four  dollars  and  eighty-four  cents  of 
United  States  coin.  This  is  forty  cents  more  than 
what,  (four  dollars  and  forty -four  cents)  in  commercial 
transactions,  is  erroneously  called  the  par  value  of  the 


OFMONEY.  99 

pound  sterling  at  New  York.  Forty  cents  being 
nine  per  cent  of  four  dollars  and  forty-four  cents, 
exchange  on  London  is  quoted  in  New  York  at  one 
one  hundred  and  nine  (or  nine  per  cent,  premium) 
when  a  bill  for  one  pound  sells  for  four  dollars  and 
eighty-four  cents  of  American  coin,  which  is  the  real 
par  value  of  the  English  pound.  Therefore,  the  true 
par  of  exchange  on  London,  expressed  at  New  York 
in  the  real  money  of  both  nations,  is  about  what  is 
termed  in  the  customary  language  of  trade,  one 
hundred  and  nine  per  cent.  These  observations  apply 
to  our  present  gold  coins,  and  the  silver  coins  under 
one  dollar.  They  do  not  apply  to  the  silver  dollar, 
the  intrinsic  value  of  which  remains  as  established  in 
the  last  century,  but  it  is  no  longer  coined  at  our 
Mints. 


LIBRA  If  V 

UNIVERSITY  OF 

CALIFOKNIA. 


CHAPTEE  Vin. 

Fifth  Atteibute  of  Money:    a  Sign  or  Representative  of  Labor, 
OF  Peopbrtt,  and  of  Commodities. 

Money  of  intrinsic  value  is  the  sign  or  representa- 
tive of  the  labor  expended  in  procuring  it  from  the 
mine  and  in  fashioning  it  into  coined  money.  It 
procures  that  amount  of  labor  always,  with  very 
slight  variations  which  can  occur  only  by  slow 
degrees  extending  through  long  periods  of  time. 
Whoever  possesses  it  can  obtain  that  amount  of 
labor,  or  the  products  of  that  amount  of  labor,  for  it. 
It  procures  the  comforts  of  life,  as  well  as  the  requi- 
sites to  sustain  life,  to  the  extent  to  which  that 
amount  of  labor  can  furnish  them,  among  all  civilized 
people.  Whoever  has  such  money  has  the  sign  or 
representative  of  those  products  of  labor  which  make 
up  the  wealth  of  nations.  Like  the  sign  which  a 
person  in  any  active  occupation  keeps  over  or  outside 
of  the  door  leading  to  his  place  of  business  to  inform 

(101) 


102  NATURAL    HISTOKT. 

all  passers  by  what  he  has  to  sell,  or  what  he  can 
do  for  other  people ;  so  a  piece  of  real  money  is  the 
uniform  sign  of  all  the  property  and  commodities 
which  the  same  amount  of  labor  that  was  employed 
in  procuring  it  will  always  command.  It  is  neither 
food,  nor  raiment,  nor  a  dwelling  place.  But  it  is 
the  sign  of  these,  because  by  it  these  can  all  be 
procured.  We  cannot  cat  it.  It  will  not  clothe  us. 
It  is  not  shelter.  But  it  is  a  sign,  signifying  all 
these,  wherever  it  is  carried,  among  all  civilized 
people.  Only  in  the  desert,  or  among  savages,  where 
human  life  is  not  worth  a  moment's  purchase,  does 
it  cease  to  be  a  sign  of  things  useful  to  man.  It 
fails,  only  when  civilized  life  fails  to  be  able  to 
exist. 


CHAPTEE   IX. 

Sixth  Attribute  of  Monet:     "Wealth,  or  the  Thing    Signified, 

TO    THE    EXTENT    OF    ITS    ValUE    IN    EXCHANGE. 

Money  is  wealth,  or  the  thing  signified,  because 
it  is  a  marketable  commodity,  a  universal  instrument 
of  commerce,  a  measure  of  prices,  the  equivalent 
of  labor  in  intrinsic  value,  and  a  sign  or  represen- 
tative of  property,  commodities  and  labor.  Were 
it  abundant  as  water,  it  could  not  possess  the  value 
in  exchange  which  makes  it  so  universally  acceptable 
to  mankind.  The  Creator  having  so  placed  a  com- 
paratively small  quantity  of  the  precious  metals  in 
the  earth,  that  great  labor  is  required  to  procure 
them,  their  production  is  more  limited  and  the 
supply  smaller,  than  of  most  other  useful  metals. 
The  latter  exist  in  larger  quantities  and  can  be  more 
easily  obtained.  It  is  this  limitation  of  their  quantity 
which  confers  on  the  precious  metals  much  of  the 
value  which  they  bear:    it  is  an  element  of  their 

C108) 


104  NATURAL    HISTORY 

value,  in  addition  to  those  arising  from  the  imperish- 
able and  maleable  nature  of  the  substances  com- 
posing them ;  and  in  addition,  also,  to  the  value  for 
ornamental  purposes  arising  from  their  beautiful 
appearance.  Their  scarcity  enhances  their  value  as 
commodities,  conferring  upon  them  the  power  of 
representing  a  large  amount  of  wealth  in  small 
bulk. 

Money  made  of  the  precious  metals  constitutes 
wealth  —  the  thing  signified  —  to  the  extent  of  its 
value  in  exchange,  because  of  the  intrinsic  value  of 
the  metals  for  use  in  the  arts,  and  because  the  whole 
civilized  world  accepts  it  at  almost  uniform  values 
for  every  kind  of  property,  commodities  and  services. 

Money  made  of  the  precious  metals  is  termed  real 
money,  as  distinguished  from  paper  money  that  is 
not  a  representative  of  real  money,  because  it  repre- 
sents the  labor  which  has  been  performed  in  getting 
the  metals  from  the  mines,  while  such  paper  money 
represents  a  debt  to  be  paid  by  commodities  and 
property  to  be  created  by  labor  in  the  future.  Hence 
it  is  that  real  money  is  wealth  to  a  nation,  while 
paper  money,  not  convertible  on  demand  into  real 
money,  is  a  debt  liable  to  be  paid  in  the  future  to 


OF    MONEY.  105 

« 

the  extent  that  the  quantity  of  it  in  use  makes  the  whole 
volume  of  money  in  use  exceed  the  quantity  of  real 
money  that  would  be  used  if  therewere  no  paper  money. 

Although  lawful  money  made  of  paper,  not  con- 
vertible into  real  money,  may  be  debt  to  a  nation  in 
the  aggregate,  to  an  individual  living  in  that  nation 
it  is  wealth  to  the  extent  of  its  value  in  exchange,  or 
so  far  as  he  can  procure  properties  and  commodities 
and  labor  in  exchange  for  it :  he  may  enrich  himself 
with  it,  although  the  whole  nation  may  be  getting 
deeper  in  debt  and  growing  poorer  by  the  constant 
use  or  increase  of  it;  and  it  is  therefore  usual  for  the 
rich  to  become  richer  and  the  poor  to  grow  poorer  in 
every  nation  which  resorts  to  the  prolonged  use  of 
an  excessive  inconvertible  paper  money. 

A  paper  money  or  credit  money  of  any  kind, — 
even  credit^  in  any  form  in  which  it  can  be  express- 
ed,—  convertible  into  or  at  par  with  real  money,  is 
wealth  to  a  nation  to  the  full  sum  of  its  volume,  so 
long  as  it  remains  at  par  with  real  money,  because  it 
renders  unnecessary  the  keeping  of  that  sum  of 
wealth  in  real  money,  which  is  an  unproductive 
commodity.  The  extent  to  which  such  paper  or 
credit  money  may  be  used  in  any  nation,  as  already 
6* 


106  NATURAL     HISTORY 

stated  in  previous  chapters,  is  indicated  by  the 
foreign  exchanges  being  at  par  with  the  paper  money 
of  that  nation,  or  by  the  unit  of  the  real  money  of 
the  nation  exchanging  without  any  premium  for  the 
unit  of  the  paper — or  credit  money:  that  is,  when 
the  dollar  in  coin  is  worth  no  more  than  the  paper 
credit  dollar,  and  when  one  of  them  commands  no 
greater  quantities  of  commodities  and  labor  than  the 
other.  And  paper  money  may  be  made  more 
valuable  than  real  money.  The  paper  and  credit 
money  of  any  one  place  may  be  so  reduced  in  amount 
as  to  be  worth  as  much  more  than  real  money  as  the 
expense  of  conveying  the  real  money  from  other 
places  to  that  one.  This  frequently  happens  even 
within  one  nation,  when  specie  payments  are  not 
suspended ;  whenever  the  reduction  of  the  quantity 
of  paper  money  in  any  one  place  makes  the  paper 
money  of  that  place  worth  more  than  the  coined 
money  there,  it  is  immediately  indicated  by  the  rate 
of  exchange  at  that  place  for  bills  on  other  places. 
For  example,  during  specie  payments,  when  th*e 
paper  money  and  credit  money  of  I^ew  York  became 
very  much  reduced,  as  compared  with  those  of 
Boston  and  Philadelphia,  the  rate  of  exchange  at 


OF    MONKY.  lOT 

New  York  on  those  cities  declined,  and  it  became 
profitable  to  draw  specie  from  them  to  New  York. 
That  is,  bills  of  exchange  on  Kew  York,  and  the 
paper  money  of  New  York  were  at  a  premium  in 
real  money  in  Boston  and  Philadelphia,  while 
bills  and  paper  on  Philadelphia  and  Boston  were  at  a 
discount  in  New  York.  And  this  is  precisely  what 
takes  place,  only  more  extensively,  between  the 
nations;  when  any  one  expands  excessively  the 
volume  of  its  money,  by  whatever  means,  it  drives 
away  the  real  money  to  other  nations.  If  the  in- 
crease of  money  in  any  place  does  not  expand 
prices — if  money  is  not  a  measure  of  prices — then 
the  phenomena  of  the  exchanges,  as  thus  stated,  are 
all  at  variance  with  the  truths  of  science.  The  fact 
is,  however,  that  these  phenomena  are  the  basis  of 
all  true  science,  because  they  indicate  the  laws  of 
trade  with  unfailing  certainty 

When  a  nation  increases  its  volume  of  money, 
above  the  par  of  exchange  with  other  nations,  its 
prices  rise ;  it  is,  in  prices,  richer  than  other  nations ; 
it  counts  itself  more  wealthy  than  the  other  nations; 
its  markets  become  the  best  to  sell  in,  the  worst  to 
buy  in ;  its  real  or  supposed  riches  are  consequently 


108  NATURAL    HISTORY 

reduced,  as  rapidly  as  other  nations  can  sell  to  it, 
and  as  rapidly  as  the  increase  of  the  volume  of  its 
money  stimulates  its  people  to  buy  and  consume. 

Why  the  wealth  of  a  nation  should  be  reduced,  or 
why  the  people  of  a  nation  should  be  reduced  in 
wealth  in  the  aggregate,  by  an  undue  accumulation 
of  money,  which  is  one  of  the  items  of  wealth  in 
every  nation,  seems  to  be  a  paradox.  It  is  a  paradox, 
if  it  is  not  true  that  money  is  a  measure  of  prices. 
If  it  be  true  that  money  in  every  shape  in  which  it 
performs  the  functions  of  an  instrument  of  com- 
merce or  a  commodity — whether  in  coin,  bank  notes, 
government  paper  money,  demand  deposits,  checks, 
drafts,  bills  of  exchange,  or  evidences  of  debt — is  a 
measure  of  prices,  then  the  paradox  is  explained. 
Then  it  can  be  understood  how  a  nation,  even  in  the 
midst  of  the  destruction  of  vast  volumes  of  its  wealth, 
may  be  made  to  appear  to  its  own  people  to  be 
rapidly  augmenting  its  riches,  because  large  quanti- 
ties of  money  of  one  kind  or  another  increase  prices, 
draw  multitudes  from  productive  occupations,  make 
trade  very  active,  and  intoxicate  numbers  of  people 
in  the  large  centers  of  population  with  the  sudden 
riches    acquired  in  those  occupations   immediately 


OF    MONEY.  109 

within  the  circle  of  the  influeiKje  of  the  rapidly 
increasing  volumes  of  money,  whether  the  money  be 
real,  representative  or  fictitious.  The  money  being 
available,  whetlier  in  coin  or  in  any  form  of  credit,  it 
calls  for  the  exertions  of  labor  and  the  movement  of 
commodities ;  for  it  is  a  self  evident  proposition  that 
no  laborious  occupation  can  be  undertaken,  nor  any 
commodity  moved,  without  the  hope  of  payment. 
The  existence  of  the  instrument  of  commerce,  or  a 
supposition  of  the  existence  of  that  instrument, 
precedes  the  performance  of  labor  and  the  movement 
of  commodities.  It  is  obvious,  therefore,  that  money 
in  one  form  or  other,  or  an  expectation  of  procuring 
it,  is  tlie  cause  of,  or  gives  rise  to  the  exertions  of 
labor  and  the  purchase  and  sale  of  commodities. 
Even  bills  of  exchange,  checks,  notes,  drafts  and  debt, 
or  credit,  may  be  and  are  used  to  compensate 
labor,  to  move  commodities,  to  buy  and  sell  property, 
and  thus  create  prices.  In  the  absence  of  money  of 
an  ordinary  kind,  book  accounts  or  any  of  the  more 
valuable  commodities  may  take  the  place  of  money, 
in  facilitating  exchanges.  To  assert  that  the  use  of 
such  media  of  exchange  does  not  create  prices,  ia-to 
assert  that  a  cause  does  not  produce  an  effect.     Yet 


110  KATTTEAL    HISTOEY 

it  has  been  attempted  to  be  proved,  that  the  angmen- 
tation  of  prices  of  commodities  and  property 
primarily  creates  inflations  in  the  ciirrcncy  of  those 
media  of  exchange  which  in  all  commercial  centers 
now  constitnte  the  great  volume  of  what  performs 
the  functions  of  current  money. 

The  wealth  of  a  nation  having  been  increased 
excessively  by  an  undue  accumulation  of  money,  or 
by  the  creation  of  an  undue  quantity  of  money,  then 
begin  to  be  witnessed  all  those  phenomena  which, 
as  before  observed,  make  its  markets  the  best  of  all 
the  world  to  sell  in  and  the  worst  to  buy  in:  prices 
rise,  individuals  become  suddenly  rich,  labor  is 
abandoned  for  luxurious  ease,  luxuries  are  sought 
for,  and  wealth  is  consumed  as  rapidly  as  the  increase 
of  money  creates  prices. 

A  nation  may  have  too  much  money,  therefore, 
and  in  one  sense  may  be  too  rich :  and  too  much  real 
money  in  such  a  sense  is  nearly  as  injurious  as  too 
much  irredeemable  paper  money;  with  this  differ- 
ence, the  surplus  stock  of  real  money,  during  the 
maintenance  of  specie  payments  by  law,  when  sent 
out  of  the  country,  exchanges  for  articles  of  wealth 
and  consumption ;  the  withdrawal  of  the  real  money 


OF    MONEY 


111 


reduces  the  measure  of  prices,  and  thus  prices  are 
more  speedily  restored  to  par  with  other  nations  than 
in  the  case  of  lawful,  or  current,  irredeemable,  or 
legal  tender  paper  money.  The  latter  does  not  leave 
the  country  itself,  but  it  drives  out  the  real  money, 
or  becomes  its  substitute,  and  by  forcing  the  stock  of 
real  money  very  low^,  makes  an  undue  deficiency  of 
wealth  which  must  be  filled  up  by  the  creation  of 
commodities  by  future  labor. 

To  have  a  nation's  markets  made  the  best  of  all  to 
sell  in  and  the  worst  to  buy  in,  is  not  of  itself  a 
calamity.  Circumstances  may  rise  in  which  that 
occurrence  would  be  advantageous  to  a  nation.  In 
case  of  famine,  the  surplus  of  real  money  could  be 
exchanged  for  food ;  and  in  time  of  war,  for  indispen- 
sable supplies.  And  even  in  ordinary  circumstances, 
the  restoration  of  the  economical  equilibrium  be- 
tween nations,  or  the  maintenance  of  it,  can  only  be 
effected  by  an  export  of  the  surplus  money  from  a 
nation  where  there  is  not  financial  skill  enough  to 
employ  such  surplus  in  strengthening  or  developing 
the  internal  resources,  or  where  the  precious  metals 
are  mineral  productions.  It  is  not  altogether  vision- 
ary, to  assume  wliat  might  take  place  under  control- 


112  NATURAL    HISTORY  . 

ling  circumstances  among  people  having  vast 
treasures  of  silver  and  gold  flowing  into  tlieir  country 
for  centuries:  the  efforts  they  would  make  by  means 
of  high  protective  tarifl:s  to  retain  the  precious  metals 
and  to  sustain  their  failing  home  industries;  the 
expensive  naval  armaments  and  coast  guards  main- 
tained to  suppress  formidable  organizations  of 
smugglers;  wealth  and  power  intoxicating  the 
governing  classes  to  an  extent  w^hich  w^ould  make 
them  imagine  themselves  the  rulers  of  the  w^orld,  at 
whose  fiat  the  power  of  any  rival  nation  might  be 
destroyed;  the  slow  but  steady  decay  of  home 
manufactures  giving  rise  to  prolonged  civil  w\irs 
maintained  by  powerful  w^ell  organized  smuggler- 
banditti;  political  convulsions  exhausting  the  reven 
lies  and  causing  the  government  to  borrow  money 
by  the  creation  of  an  excessive  national  debt;  the 
continued  failure  of  the  revenues  because  of  political 
disturbances,  compelling  the  government  to  violate 
the  national  faith  by  ceasing  to  pay  either  the 
principal  or  the  interest  of  the  national  debt; — all 
these  calamities,  wdth  too  many  others  equally 
deplorable,  might,  under  a  despotic  government,  fall 
upon    a  people,   who,      nevertheless,  might    be    a 


OF    MONET.  113 

nation  of  tlie  highest  type,  both  in  intellectual  abilitj 
and  physical  development,  capable  of  an  exalted 
civilization  and  having  a  brilliant  history.  One  may 
suppose,  on  the  other  hand,  the  case  of  a  nation 
having  a  well  organized  industry  by  which  wealth  is 
accumulated;  where  liberal  institutions  offer  an 
asylum  for  the  greatest  intellects  escaping  from 
tyranny  so  often  rampant  in  some  part  of  the  world ; 
possessing  an  organized  monetary  interest  and  an 
active  mercantile  public  enjoying  the  confidence  and 
respect  of  the  governing  power;  and  these  elements 
of  national  vitality  so  efficient,  under  the  direction  of 
a  vigilant  public  morality,  that  the  people  would  be 
enabled  to  overcome  all  those  destructive  influences 
of  great  wealth  or  unprincipled  ambition  which  so 
often  draw  nations  into  the  most  unjustifiable  wars 
or  to  the  inciting  of  civil  war  or  insurrection  in  other 
nations; — the  nation  thus  favored  becoming  great 
and  wealthy  through  the  freedom  of  its  trade  and  its 
enlightened  principles  of  self-government,  and  devot- 
ing its  surplus  treasures  to  the  development  of  the 
internal  resources  of  its  own  territories,  or  loaning 
them  to  other  nations  for  tlie  same  purpose,  and  tims 
exhibiting  to  the  world  a  way  of  life  for  nations,  by 


114  NATURAL    HISTORY. 

pursuing  which  all  mankiud ,  n^igjit  be  brought  to 
adopt  and  cultivate  the  arts  of  peace. 


L I  B  K  A  K  1 


UNITKRSITY  OF 


V 


CALIFORNIA 


/ 


CHAPTER  X. 


1.  Review  of  the  Attributes  of  Money:  the  Monetary  Standard, 
Monetary  Unit,  or  True  Standard  of  Value.  2.  Local  and 
Universal  Money  Identical  within  their  Respective  Spheres. 


1.  That  the  attributes  of  real  money  among  all 
civilized  nations  are :  an  instrument  of  commerce,  a 
commodity,  a  measure  of  prices,  an  equivalent  for 
labor,  a  sign  or  representative,  and  wealth  to  the 
extent  of  its  value  in  exchange, —  is  a  truth  estab- 
lished by  tlie  facts  of  every  day  life.  There  is  a 
current  money  of  the  world,  governing  the  prices  of 
the  world.  It  is  this  money  which  alone  possesses 
ALL  the  attributes  referred  to.  It  is  this  that  the 
economists  have  generally  considered  the  only  kind 
known  in  modern  times  deserving  the  name  of  real 
money.  If  any  thing  called  money  does  not  possess 
all  these  attributes,  then  it  is  not  that  real  money 

(116) 


116  NATTJEAL    HISTORY 

which  constitutes  the  currency  of  the  world.  But 
real  money  itself  may  be  altered.  It  may  be  de- 
based or  adulterated.  It  may  be  made  to  undergo  a 
reduction  in  weight  of  the  quantity  of  pure  metal, 
and  the  instances  in  which  this  change  has  taken 
place  have  been  very  numerous.  It  has  already 
been  observed  that  this  custom  was  frequently  re- 
sorted to  in  the  middle  ages,  and  prevailed  in  almost 
every  country,  whenever  governments,  in  great  emer- 
gencies, desired  to  procure  money.  The  right  to 
make  this  adulteration  of  money,  being  wantonly  ex- 
ercised, became  at  last  one  of  the  modes  of  getting 
property  by  force,  in  times  when  the  rapacity  of 
domineering  races  or  classes,  subjugating  peoples  by 
the  power  of  brute  force,  established  the  supremacy 
of  the  law  of  the  beasts,  that  ^'might  makes  right^'^  in 
violation  of  every  principle  of  justice  known  among 
men.  This  injustice  becoming  apparent,  revolutions 
were  resorted  to,  for  the  dethronement  of  Monarchs 
addicted  to  the  vice.  Kevolutions  have  also  been 
preceded  in  many  countries  by  the  debasing  of 
the  currency  through  the  issue  of  undue  quan- 
tities of  paper  money.  The  great  rebellion  of  the 
Southern  States  is  rapidly  falling  to  pieces  from  the 


OF    MONEY.  117 

want  of  confidence  inspired  among  its  leaders  by  the 
worthlessness  of  their  paper  money.  They  supposed 
it  possible  to  repeat,  in  support  of  slavery,  that  appro- 
priation of  capital  tlirough  the  issue  of  paper  money, 
which  our  fathers  accomplished,  in  support  of  liberty, 
during  -the  war  of  Independance.  In  the  beginning 
of  the  application  of  a  system  of  adulterating  real 
money,  or  of  the  debasing  of  the  paper  money  from 
excessive  issues,  the  losers  seem  to  be  only  the 
holders  of  property  having  debts  due  to  them.  But 
as  people  in  debt  become  released  from  then-  debts, 
paying  them  off  with  the  increased  volume  of 
the  depreciated  paper  or  debased  coin,  the  suffej-ings 
of  the  working  population  become  very  great.  At 
last,  in  the  case  of  a  depreciated  paper,  every  effort 
is  made  to  restore  an  equitable  monetary  system 
which  all  classes,  both  rich  and  poor,  become  con- 
vinced from  experience,  is  for  the  best  interests  of 
the  nation.  Then  all  paper  tender  laws  are  repealed, 
or  a  real  money  standard  is  sought  for  and  adopted, 
or  laws  are  passed  declaring  what  the  standard  in 
real  money  shall  be,  and  that  standard  becomes  the 
measure  of  prices  or  values.  For  tliis  standard,  as 
already  observed  in  preceding  chapters,  the  precious 


118  NATURAL     II  I  S  T  O  E  T 

metals  liave  been  found  to  be  the  only  suitable 
material,  and  a  certain  quantity  of  these  metals  to 
each  piece  of  money  is  in  all  enlightened  and  civil- 
ized countries  the  standard  in  the  making  of  real 
money.  This  quantity  is  called  the  monetary  unit, 
and  is  the  true  standard  of  value,  or  measure  of 
prices,  which  gives  rise  to  all  money  values  or  prices 
of  property  and  commodities  of  every  kind.  If  any 
thing  else  be  substituted  for  it  by  compulsory  legisla- 
tion, the  natural  law  governing  real  money  remains 
in  full  force,  over  riding  all  human  laws,  and  main- 
taining its  supremacy  in  the  current  prices  at  which 
the  coined  money  is  bought  and  sold.  Eeal  money 
is  the  supreme  arbiter  of  all  values  or  prices.  It  is 
in  the  financial  economy  of  a  nation  precisely  what 
the  sun  is  to  the  planets ;  as  the  sun  is  the  central 
governing  body  around  which  the  planets  all  revolve, 
so  the  monetary  unit  of  a  nation  is  the  central  gov- 
erning principle  which  controls  all  kinds  of  prices  or 
values,  as  well  as  all  the  circulating  mediums,  cur- 
rencies, or  mediums  of  exchange,  and  public  and 
private  credits  in  that  nation.  And  as  large  planets 
have  their  satellites,  so  precisely  do  large  quantities 
of  real  money  have  their  financial  satellites  in  media 


OF    MONEY.  119 

of  exchange,  circulating  media,  credits,  bills  and 
diafts,  payable  on  demand  or  running  on  time. 
iN'ow,  if  it  be  true  that  there  is  one  great  central  sun 
in  the  universe,  which  all  other  solar  systems  revolve 
around  as  a  common  center,  that  great  sun  may  be 
assumed  to  represent  the  monetary  system  of  what- 
ever nation  at  any  time  may  be  the  central  financial 
depot  for  the  adjustment  of  the  exchanges  of  -  the 
w^orld.  The  final  settling  place  for  paying  the 
balances  of  trade  between  nations,  correspond  with 
the  Bank  Clearing  House  of  a  city,  the  final  sett- 
ling place  every  morning  for  paying  the  balances 
arisino:  from  the  exchansres  between  the  banks  for 
the  preceding  day.  The  diurnal  motion  of  tlie  earth, 
on  its  own  axis,  may  be  com]3ared  to  the  daily 
evolutions  of  the  currenc}^  in  a  city,  as  the  revolutions 
of  planetary  and  solar  bodies,  each  on  its  own  axis, 
and  within  its  orbit,  and  all,  around  their  primaries 
or  the  common  center,  may  be  compared  to  the 
evolutions  of  all  kinds  of  currencies  circulating  in  a 
nation  and  the  world. 

Th^  monetary  unit  in  every  country  having  coined 
money,  is  a  certain  weight  of  pure  gold  or  pure  silver 
coined  into  a  certain  piece  of  money.     All  other 


/^ 


120  NATURAL    HISTORY 

coins  are  usually  made  in  the  same  way,  or  propor- 
tion, and  such  monev  is  called  the  lei^al  tender. 
Some  nations  have  what  is  called  a  double  standard, 
meaning  thereby  that  a  certain  quantity  of  i)ure  gold 
put  into  the  gold  coin  constitutes  money;  and  that  a 
certain  quantity  of  pure  silver  put  into  the  silver 
coin  also  constitutes  money.  Generally,  however, 
the  nations  have  selected  silver  for  the  monetary 
unit,  because,  as  before  observed,  there  is  more 
uniformity  m  the  quantity  of  human  labor  required 
to  get  silver  out  of  the  earth  than  in  the  case  of  gold. 
There  is  always  more  or  less  difference  between  the 
price  or  exchangeable  value  of  gold  when  bought  or 
sold  for  silver,  as  the  supply  of  one  metal,  compared 
with  that  of  the  other,  increases  or  diminishes;  some- 
times one  ounce  of  gold  has  been  worth  only  ten  or 
eleven  of  silver,  and  at  other  times  fourteen  or  fifteen 
of  silver  were  required  to  buy  one  of  gold,  but  these 
extreme  fluctuations  have  occurred  almost  imper- 
ceptibly, and  at  a  long  distance  of  time  from  each 
other.  Oriental  nations,  from  remote  antiquity,  have 
shown  a  decided  preference  for  silver  money,  which 
has  been  sent  to  Asia  from  Europe  in  a  steady  stream. 
America  has  also  sent,  through  Europe,  or  directly, 


OF     MONEY.      ^  121 

to  Asia,  a  large  portion  of  the  products  of  her  mines 
of  silver.  Gold,  too,  has  found  a  grave  in  Asia.  It 
is  supposed  that  the  peoples  of  Asia  have  long  been 
in  the  habit  of  burying  their  treasures  in  the  earth, 
and  that  the  secret  of  the  place  of  deposit  frequently 
dies  with  the  depositor.  Mother  earth  is  a  safe  but 
not  very  profitable  bank  of  deposit,  in  such  cases. 
This  practice  of  hoarding  has  also  prevailed  in 
Europe,  in  time  of  war,  and  prevails  yet,  whenever 
apprehensions  of  a  great  war  seize  upon  the  minds  of 
the  people.  It  is  the  offspring  of  fear,  or  panic.  It 
tends  greatly  to  the  impoverishment  of  a  people,  or 
nation,  addicted  to  the  custom. 

An  excessive  paper  money  may  be  issued  and  made 
a  lawful  money,  but  the  power  of  the  unit  of  real 
money  is  not  thereby  destroyed :  funded  stocks  of 
the  nation,  or  government  paper  money,  becoming 
the  monetary  unit  of  prices  expressed  in  the  lawful 
paper  money,  appear  to  maintain  almost  a  uniform 
value  or  price,  while  real  money  fluctuates  in  propor- 
tion as  the  whole  amount  of  the  paper  money  or 
credit  money  in  use  approaches  or  exceeds  the  nor- 
mal volume  of  the  measni*e  of  prices  required  by  the 
nation.      The    state    of   pnblij    confidence    is    also 


122  NATURAL    HISTORY 

exhibited  in  the  fluctuations  in  the  price  of  real 
money,  when  the  latter  is  sold  for  paper  money. 

Even  if  tlie  law  creating  a  monetary  unit  of  coined 
money  be  repealed  in  any  nation,  the  monetary  units 
of  other  nations  at  once  take  the  place  of  the  one 
struck  out  of  legal  existence  in  that  nation,  and  assert 
their  supremacy  over  all  prices  and  values  in  that 
nation.  This  natural  law  of  the  supremacy  of  the 
monetary  units  of  other  nations  exhibits  its  power  in 
defiance  of  all  penal  laws  for  tlie  suppression  of  it. 
In  the  midst  of  the  most  violent  expansions  of  lawful 
paper  money  in  one  nation,  the  monetary  units  of 
coined  money  of  other  nations  display  tlieir  govern- 
ing power  within  that  nation  in  the  preniinin  on 
silver  and  gold,  corresponding  with  a  discount  on  the 
paper  money,  the  latter — the  paper-— being  measured 
by  the  real  monetary  units;  or  in  the  premium  on 
the  foreign  exchanges,  as  determined  by  the  monetary 
units  of  the  other  nations.  Wlien  a  lawful  paper 
money  without  limit  is  instituted  in  a  nation,  and 
the  unit  for  real  money  is  repealed,  there  remains  no 
longer  in  that  nation,  for  itself,  any  fixed  measure  of 
real  value;  labor  and  propei-ty  become  subject  to 
the    uncertainty   of   the   paper   money   issues,    this 


OF    MONEY.  123 

uncertainty  being  made  lawful  by  the  enactment 
establishing  lawful  paper  money.  Yet,  if  the  power 
of  the  unit  of  coined  money  be  recognized  to  any 
extent  in  the  fundamental  principles  of  the  financial 
economy  of  a  nation  resorting  to  a  lawful  paper 
money, — as  paying  in  real  money  the  duties  on 
imports  and  taxes  and  the  interest  on  the  public 
debt— there  cannot  be  in  that  nation  so  excessive  an 
emission  of  paper  money  (if  government  funds  its 
paper  money  issues)  as  takes  place  in  a  nation  which 
totally  disregards  the  unit  of  real  money  by  exclud- 
ing it  wholly  from  the  financial  system,  because  the 
interest  on  the  public  debt,  payable  in  real  money, 
increases  with  the  premium  on  real  money,  and  thus 
the  paper  money  issues  may  be  controlled  to  a 
certain  extent  by  funding. 

2.  Money  composed  of  the  precious  metals  has 
been  said  to  be  the  currency  of  the  world,  or  univer- 
sal money,  governing  prices  throughout  the  world. 
A  local  money  made  for  circulation  within  any 
place,  whatever  be  the  material  of  which  it  is  com- 
posed, exerts  upon  prices  in  that  place  the  same 
influence  that  universal  money  exerts  upon  the  prices 
of  the  commercial  w^orld.     In  performing  the  funct- 


124  NATURAL      HISTORY. 

ions  of  a  medium  of  exchange,  or  an  instrument  of 
commerce,  both  kinds  of  money  are  identical  within 
their  respective  spheres ;  the  local  money  becoming 
depreciated,  however,  when  the  quantity  of  it  is 
maintained  at  an  amount  greater  than  the  sum 
required  to  maintain  the  exchanges  at  the  real  money 
par  between  the  locality  peculiar  to  itself  and  all 
other  places  throughout  the  world,  exactly  as  real 
money,  when  it  accumulates  in  any  nation  to  more 
than  that  sum,  becomes  itself  depreciated. 

END   OF  THE  FIRST  VOLUME. 


THIS  BOOK  IS  DUE  ON  THF.  LAST  DATE 
STAMPED  BELOW 

AN  INITIAL  PINE  OP  25  CENTS 

WILL  BE  ASSESSED   FOR   FAILURE  TO   RETURN 
THIS   BOOK  ON   THE   DATE  DUE.   THE   PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY    AND    TO    $1.00    ON    THE    SEVENTH     DAY 
OVERDUE. 

FEB  13  1942 

■^•^  f  ^      r* 

-:^an52/y/- 

ZoJaro^rr 

lOIar'Cr-" 

LD21-100m-7,'40  (69368)    1 

rn    inubu 


/■ 


rs,7i 


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